World Economy

BOJ Not Boosting Stimulus

BOJ Not Boosting StimulusBOJ Not Boosting Stimulus

The Bank of Japan refrained from increasing monetary stimulus and signaled a more optimistic view on the economy, as Governor Haruhiko Kuroda bets on stronger growth fueling stalling inflation.

The central bank will continue to boost the monetary base at an annual pace of 80 trillion yen ($662 billion), it said in a statement on Friday. All of 36 economists in a Bloomberg survey forecast the outcome, Bloomberg reported.

Japan is flashing mixed signals on its recovery from last year’s recession, with an increase in spending by companies and households and an inventory buildup that threatens to damp the economy after its first back-to-back quarterly expansion since 2013. Kuroda has said there’s no need for further easing now because a virtuous economic cycle is working, even as cheaper oil weighs on inflation.

“The BOJ is becoming more optimistic,” said Kazuhiko Ogata, an economist at Credit Agricole SA. “Its slightly more upbeat assessment suggests that the chances are receding for additional easing in coming months.”

The yen rose 0.2 percent to 120.83 per dollar at 12:40 p.m. in Tokyo, while the Topix index of shares lost 0.1 percent. The Japanese currency has declined about 23 percent since Kuroda introduced the record asset-purchase program in April 2013.

Data this week showed gross domestic product grew an annualized 2.4 percent in the first three months of 2015, as consumption climbed for a third straight quarter and companies boosted spending for the first time in a year. Rising inventories -- a sign that demand isn’t keeping up with supply - - gave a big boost to growth.

“GDP growth sharply exceeded expectations. However, the content looked weak,” Kyohei Morita, an economist at Barclays Plc., wrote in a report.

Private consumption has been resilient, the BOJ said in its statement, removing a previous qualification that “recovery in some areas has been sluggish.” It said the economy has continued to recover moderately, omitting the word “trend” that it added after a sales tax was raised in April last year.

Inflation expectations are rising and a gap between demand and supply will continue to tighten, helping to drive increases in consumer prices, Kuroda said on May 15.