Bank of Japan redoubles commitment to easing

The Bank of Japan put on a show of resolve about its ambitious plan to boost the country's money supply at a policy meeting yesterday, as economists had expected, hours after a report highlighted deflation's grip on the economy.

Consumer prices fell the most in two years, the government report showed, underscoring the challenge facing bank governor Haruhiko Kuroda as he aims to meet a 2 per cent inflation target.

The central bank reiterated its commitment to enlarging the monetary base - including physical currency in circulation and assets that financial institutions hold at the bank - by between 60 trillion yen (HK$4.69 trillion) and 70 trillion yen a year.

"We can expect more easing later this year if prices refuse to edge up," said Junko Nishioka, chief economist at Royal Bank of Scotland in Tokyo and a former central bank official. "It's imperative for the bank to clearly communicate its objectives to maintain expectations that prices will rise."

The yen strengthened, paring its slide since November, which has helped boost Japanese exporters' competitiveness.

Consumer prices excluding fresh food fell 0.5 per cent last month from a year earlier, the statistics bureau said yesterday. Overall, prices dropped 0.9 per cent. The data will be no surprise for the Bank of Japan, which said this month that it expects prices to keep declining for "the time being", even after unveiling its plan for unprecedented easing.

In January, the median forecast of the central bank's nine-member board was that the core consumer price index would rise 0.9 per cent in fiscal 2014, which ends in March 2015.