Bank of Japan sees steady progress in hitting 2pc inflation goal

The Bank of Japan kept monetary policy steady and laid out projections underscoring its conviction that inflation will head steadily towards its 2 per cent target, suggesting no additional stimulus is on the near-term horizon.

In a twice-yearly outlook report, the central bank projected that core consumer inflation will accelerate this year and stay at about 2 per cent for at least two years from the middle of 2015, signalling its confidence on meeting its price goal.

It also maintained its view that Japan's economy will continue its modest recovery despite a temporary slump in demand caused by a sales tax rise this month.

"As the Bank of Japan proceeds with its qualitative and quantitative monetary easing and as actual inflation exceeds 1 per cent, medium- to long-term inflation expectations will rise as a trend and gradually converge around its price target of 2 per cent," the central bank said in the report, which serves as a basis for future monetary policy decisions.

As widely expected, the bank maintained its pledge to increase base money, its key policy gauge, at an annual pace of 60 trillion (HK$4.53 trillion) to 70 trillion yen.

The upbeat projections may reinforce a growing market consensus that the bank will stay put on policy until July or even longer, as it awaits more data for clues on how the economy has weathered the sales tax increase.