BOJ Keeps Policy Steady, Sounds More Upbeat on Economy

BOJ Keeps Policy Steady, Sounds More Upbeat on Economy

BOJ Keeps Policy Steady, Sounds More Upbeat on Economy

The central bank adjusted its inflation forecast for this year to 1.4 percent from an earlier forecast of 1.5 percent. The consumer price index (CPI) growth forecast is lowered to 1.4% as against 1.5%, projected in January.

But it warned of risks to that scenario from global trends, including US economic policies, Britain's exit from the European Union and other geopolitical trends.

But the bank will not automatically raise its yield target just because this happens, the BOJ chief has stated.

In the bank's quarterly economic outlook report, the BOJ upgraded its assessment of the economy, saying that "Japan's economy has been turning toward a moderate expansion on the back of global economic growth and recovery in domestic demand".

In its quarterly outlook report, the BOJ forecast consumer price gains of 1.4 percent this fiscal year, a cut from a previous estimate of 1.5 percent, and noted that inflation expectations are now weakening.

But it maintained its projection that inflation will reach 2 percent during the fiscal year ending in March 2019 on the view that a tightening job market would gradually push up wages.

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Policymakers at the Bank of Japan have made a decision to keep its massive easing program unchanged to achieve its 2-percent inflation target.

"Governor Kuroda poured cold water on expectations of tighter policy in the post-meeting press conference", research house Capital Economics said in a commentary.

Treasury bonds remained positive even as the outline raised the risk of bigger deficits and USA stocks slipped. Analysts also expect the central bank to maintain a loose pledge to keep increasing its government bond holdings by 80 trillion yen ($719 billion) per year.

"The forecasts didn't change much but reading between the lines of the statement you can see their rising confidence", said Maiko Noguchi, senior economist at Daiwa Securities and a former central bank official. Talking about a specific exit strategy now would cause undue confusion in markets.

With the economy in good shape, the BOJ is widely expected to leave unchanged its commitment to guide short-term interest rates at minus 0.1 percent and the 10-year government bond yield around zero percent through aggressive asset purchases.

Japan's economy has shown signs of life, as exports rose the most in over two years in March and manufacturers' confidence climbed to the highest since the global financial crisis a decade ago.

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