Bank of Japan keeps its massive stimulus programme

Friday 20 December 2013 08.08
Bank of Japan says economy on track for moderate recovery
Bank of Japan says economy on track for moderate recovery

The Bank of Japan kept monetary policy steady earlier today and maintained its view that the economy is recovering moderately.

The bank has been encouraged by growing signs that the benefits of its massive stimulus are spreading through broader sectors of the economy.

With the Bank of Japan maintaining its ultra-easy policy even as the US Federal Reserve begins to wind down its own mega-stimulus, the widening interest rate gap between the two economies will help keep the yen weak against the dollar, analysts say.

A weak yen benefits Japan's export-reliant economy.

It will help the Bank of Japan attain its target of 2% inflation target within two years to decisively lift the country out of a long phase of debilitating deflation.

Governor Haruhiko Kuroda is likely to stress at a post-meeting news conference that the Japanese central bank's resolve to maintain its ultra-loose stimulus even as the Fed begins dialing back its massive asset-buying programme.

As widely expected, the Bank of Japan voted unanimously to maintain its pledge of increasing base money, or cash and deposits at the central bank, at an annual pace of 60 trillion yen ($576 billion) to 70 trillion yen.

"Japan's economy is recovering moderately," the central bank said in a statement announcing the policy decision, unchanged from its assessment last month.

But it slightly tweaked its view on the outlook to signal that it was mindful of the potential pain on the economy from an increase in the national sales tax in April next year.

"The economy is expected to continue a moderate recovery as a trend, while being affected by an increase and subsequent decline in demand prior to and after the consumption tax hike," it said.

Last month, the BOJ said the economy is expected to continue recovering moderately.