Bank of Japan holds fire on new easing measures, claims economy improving
May 22, 2014, 12:03 am TWN
TOKYO -- The Bank of Japan on Wednesday held off expanding its monetary easing campaign and said the world's number three economy was picking up pace, despite fears that a sales tax rise will dent consumer spending.
Policymakers dropped the word "deflation" from their post-meeting statement after unanimously agreeing to keep the central bank's stimulus program unchanged following a two-day meeting — a possible signal that efforts to conquer years of falling prices could be paying off.
The bank said its moves to boost laggard growth were taking hold, with Japan's economy "expected to continue a moderate recovery."
"Quantitative and qualitative monetary easing (QQE) has been exerting its intended effects and the bank will continue with the QQE ... as long as it is necessary" to reach stable inflation, the bank said.
The yen strengthened after the announcement, with the dollar buying 101.20 yen from above 101.30 yen before the BOJ statement.
Investors are now awaiting a regular press briefing by BOJ governor Haruhiko Kuroda at about 3:30 p.m. local time (0630 GMT) for clues about when the bank might pull the trigger on further measures.
The unprecedented program announced last year, similar to the U.S. Federal Reserve's asset-buying plan, is aimed at stimulating growth by injecting massive amounts of money into the financial system and trying to reach a 2.0 percent inflation target by next year.
Kuroda has previously said he would not hesitate to act as fears grow over the impact of Japan's April 1 sales tax rise.
"The optimistic tone of recent BOJ communication suggests that the chances of additional stimulus being announced as soon as July have shrunk substantially, but we still think that more easing will eventually be required," said London-based Capital Economics.