The Bank of Japan said Tuesday that its board, as widely expected, decided by a unanimous vote to leave the bank’s policy target unchanged while noting weaker exports and slightly higher business investment and factory output.
“The Bank of Japan will conduct money market operations so that the monetary base will increase at an annual pace of about Y60 to Y70 trillion,” the BOJ said, adding that its financial asset purchases will also proceed as decided in April 2013.
On the current climate, the BOJ repeated its overall assessment presented last month, saying, “Japan’s economy has continued to recover moderately, and a front-loaded increase in demand prior to the consumption tax hike has recently been observed.”
The BOJ also maintained its outlook, repeating, “Japan’s economy is expected to continue a moderate recovery as a trend, while it will be affected by the front-loaded increase and subsequent decline in demand prior to and after the consumption tax hike.”
However, the BOJ noted that Japanese exports “have recently leveled off more or less.” It is a downward revision from its previous statement that “exports have generally been picking up.”
On the other hand, the BOJ upgraded its assessment of two major factors that could support growth after the April sales tax hike.
“The pick-up in business fixed investment has become increasingly evident as corporate profits have improved,” it said. It compared with its February statement: “Business fixed investment has been picking up as corporate profits have improved.”
Citing resilient consumption, the main driver of the recent economic growth, the BOJ said “industrial production has been increasing at a somewhat accelerated pace,” which is also an upgrade from its previous view that “Industrial production has been increasing moderately.”
The BOJ’s near-term inflation outlook remains the same. It expects the year-on-year rate of increase in consumer prices (excluding the direct impact of the sales tax hike) “is likely to be around 1.25% for some time.”
The board’s risk assessment is also unchanged: “Risks to the outlook include developments in the emerging and commodity-exporting economies, the prospects for the European debt problem, and the pace of recovery in the U.S. economy.”
But board member Sayuri Shirai continued dissenting from endorsing this analysis, urging that the pace of improvement in employment and income in Japan should be added to the list of risks.
For his part, board member Takahide Kiuchi continued to propose the BOJ should maintain the high degree of easing only during the two-year period from April 2013 so that it is not overdone, but his proposal was again voted down by the rest of the board.
BOJ Governor Haruhiko Kuroda will hold a news conference from 1530 JST (0630 GMT) to 1615 JST (0715 GMT) to discuss the board’s decision.