“That commitment is key to ending deflation and the core of the policy effect of QQE”, Kuroda said, referring to his programme of quantitative and qualitative easing. Real, or inflation-adjusted, wage growth has only just begun.
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A few analysts had predicted the Bank of Japan would expand its massive 80 trillion yen (S$930 billion) annual asset-buying scheme, launched more than two years ago to kick-start growth and drag prices out of a decades-long downward spiral.
Recent economic data were mixed.
The data fuelled a few speculation the bank would make a move.
Still, a few psychology may be in play in Friday’s announcement.
The Stoxx Europe 600 was 0.3% higher ahead of the release of the latest eurozone inflation data.
JPMorgan Chase & Co. and Mitsubishi UFJ Morgan Stanley Securities Co. are among those that expected the BOJ to cut its inflation forecasts on Friday. “Taking that into account, there are chances of no action”.
If the BOJ decides to ease, ramping up the pace for purchases of Japanese government bonds, exchange-traded funds and real estate investment trusts would be obvious paths to take.
Yet those aren’t the only tools available to Kuroda. The yen was little changed against the dollar after the decision, suggesting that the tone adopted by the central bank was mostly expected, analysts said.
Wall Street provided a soft lead with dealers virtually unmoved by a Commerce Department report showing third-quarter United States economic growth slowed to an annual rate of 1.5 percent, in line with expectations, from a 3.9 percent pace in the second quarter. Mining-related shares weighed on the index after iron ore prices fell 0.6% to $49.65 a tonne. The yen pared its weekly rise against major peers, as the BoJ adjudged current levels of stimulus appropriate.
For fiscal 207 inflation is expected to jump by 1.3 percentage points due to the sales tax hike, with consumer price inflation seen at 3.1 percent, unchanged from April’s outlook. All 10 groups on the index have advanced this month, led by a measure of energy shares. The bank now sees the inflation target reached around the six-month period through March 2017.
Earlier in the session, short-covering kicked in to help bring the greenback back from its low after the Bank of Japan’s decision to stand pat.
All of the projected figures represent the median forecasts of the nine members of the Policy Board. It did much the same thing in April, when Mr Kuroda mainly attributed the delay to lower oil prices.
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Although the BOJ lowered its forecast for inflation, it maintained that the underlying trend in inflation is steadily rising and as the impact of the fall in oil prices dissipates, inflation will accelerate toward its target of 2.0 percent. Government officials and the finance minister had indicated that a negative towards the requirement of adding additional stimulus. Economists close to Mr Abe had sent signals that further easing was unnecessary. Consumer spending is a primary weakness in Japan’s economy.
