The Bank of Japan (BOJ) yesterday struck a less optimistic tone on its view of the world’s No. 3 economy, although it held off fresh monetary easing measures after its latest policy meeting.
Policymakers flagged housing and industrial production as weak spots, and said business sentiment had “paused” owing to an April sales tax hike that led to a sharp contraction in second-quarter gross domestic product.
“Japan’s economy has continued to recover moderately as a trend,” the BOJ statement said, but it noted “some weakness, particularly on the production side” as demand dived after the rate hike.
Consumer spending has yet to recover fully, but the central bank said it was still on track to hit a 2 percent inflation target, seen as key to reversing years of falling prices and tepid growth.
Despite the slump, BOJ Governor Haruhiko Kuroda has kept up his rosy view of Japan’s prospects, saying yesterday that factory output would turn around along with corporate and household spending.
“Industrial production data has been showing some weakness ... but we’ve been told that the outlook is positive,” he told reporters at a post-meeting news briefing.
Kuroda’s upbeat take on the economy has appeared increasingly at odds with the official data, as it suffered in the April-June quarter its deepest contraction since the 2011 quake-tsunami disaster.
Japan’s top central banker has given little indication he will soon increase the BOJ’s asset-purchasing stimulus, saying the impact of the sales tax hike has not been as bad as expected.
Kuroda also said he was still confident in reaching the inflation target by next year, but added that the bank could adjust its policy if necessary to address “both upside and downside risks” to the economy.
Tokyo’s tax hike was seen as crucial to addressing a mammoth public debt, but economists had warned it could derail a budding recovery in an economy beset by years of deflation.
The 1.8 percent dip in GDP — or a 7.1 percent contraction at an annualized rate — gave the clearest picture yet of the tax hike’s impact, and threw into question Tokyo’s plans for another rise next year.
Millions of shoppers made a last-minute dash to stores before prices went up on April 1, which was followed by a slump in spending.
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