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BOJ stands pat on easing, claims economy 'recovering moderately'

TOKYO -- The Bank of Japan (BoJ) on Friday held off announcing any fresh measures to stimulate the economy, offering the upbeat view that it was “recovering moderately” while efforts to stoke inflation were taking hold.

The decision comes days after the bank's closely watched Tankan quarterly survey showed business confidence has soared to a six-year high, underscoring growing optimism among Japanese firms.

However, analysts said the bank would likely have to widen its monetary easing measures if it is going to win its battle against deflation as a sales tax hike is due to come into effect in April.

There had been speculation of an expansion of the asset-purchasing program after figures last week showed a sharp slowdown in July-September growth, which raised concerns about the strength of the world's third-largest economy.

“Japan's economy has been recovering moderately,” the BoJ said in a statement, adding that “inflation expectations appear to be rising on the whole.”

“The year-on-year rate of increase in the CPI (consumer price index) is likely to rise for the time being.”

The yen was little changed after the widely expected announcement. The dollar bought 104.44 yen compared with 104.37 yen earlier Friday, with the greenback bolstered by the U.S. Federal Reserve's announcement Wednesday that it would wind-down its own stimulus from January.

The Fed cited a pick-up in recent data for its decision to cut the bond buying by US$10 billion to US$75 billion a month.

BoJ Governor Haruhiko Kuroda said the U.S. economy was now poised to “accelerate significantly given that concerns over budget issues have sharply decreased.”

He added that the yen's sharp decline since late last year, which makes exporters move competitive overseas, was boosting Japan's prospects.

“A correction to the yen's excessive rise against other major currencies is positively affecting the Japanese economy,” he told a post-meeting news briefing Friday.

Kuroda unveiled the BoJ's vast asset-buying scheme in April as part of a broader plan by Prime Minister Shinzo Abe to reinvigorate the economy and eradicate deflation with a policy blitz.

Reversing years of falling prices is a key goal of the BoJ's plan, which aims for 2.0 percent inflation in two years, although some analysts are growing increasingly sceptical of that ambitious timeline.

“We ... maintain our main scenario that the BoJ will have no choice but to ease further in order to achieve the 2.0 percent inflation target,” Credit Agricole said ahead of Friday's announcement.

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