The Bank of Japan (BOJ) refrained from adding to unprecedented monetary stimulus after business confidence surged and Japanese Prime Minister Shinzo Abe decided the economy was strong enough to weather a sales-tax increase.
Governor Haruhiko Kuroda’s board retained a goal of expanding the monetary base by ￥60 trillion to ￥70 trillion (US$720 billion) a year, the central bank said in Tokyo yesterday.
Thirty-five of 36 economists in a Bloomberg News survey forecast no change in policy, while one predicted more purchases of real-estate investment trusts.
Kuroda and his officials will monitor the risk that a ￥5 trillion fiscal package announced this week will not be enough to offset the blow to consumption and economic growth from the tax increase set for April.
Most economists predict additional stimulus in the first half of next year as Abe and the BOJ try to catapult the nation out of 15 years of deflation.
“The inaction signals confidence in the economy,” said Maiko Noguchi, senior economist at Daiwa Securities Co and a former central bank official. “The BOJ will have to take an additional step to achieve its inflation target at some point, and the second meeting in April is the most likely timing.”
The economy will contract an annualized 4.5 percent in the second quarter next year before returning to growth, according to the median estimate of economists in a separate survey.
The poll was mostly conducted before the ￥5 trillion stimulus package was announced. Atsushi Mizuno, a former BOJ board member, said in an interview this week that a decision on any extra easing will not come until at least the second quarter of next year.
The BOJ maintained its view that the Japanese economy is recovering moderately, according to the statement.
“Business fixed investment has been picking up,” and “housing investment has also increased,” the bank said, changing the wording slightly.
The central bank will continue its monetary easing as long as needed to achieve stable 2 percent inflation, making policy adjustments as appropriate, according to the statement.
The yen’s slide of about 20 percent against the US dollar in the past year has buoyed corporate profits and confidence, while pushing up the cost of energy imports.
Large manufacturers’ confidence rose last month to the highest level since the early stages of the global credit crisis in 2007, a BOJ report showed this week. In contrast, consumer confidence fell for a third month in August, according to government data.
Consumer prices excluding fresh food rose at the fastest pace since November 2008 in August on energy costs, rising 0.8 percent from a year earlier.
That compares with the BOJ’s goal of 2 percent inflation.