- POSTED: 20 Dec 2013 13:13
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The Bank of Japan on Friday held off announcing any fresh measures to stimulate the economy, offering the upbeat view that it was "recovering moderately" while efforts to stoke inflation were taking hold.
TOKYO: The Bank of Japan on Friday held off announcing any fresh measures to stimulate the economy, offering the upbeat view that it was "recovering moderately" while efforts to stoke inflation were taking hold.
The decision comes days after the bank's closely watched Tankan quarterly survey showed business confidence has soared to a six-year high, underscoring growing optimism among Japanese firms.
However, analysts said the bank would likely have to widen its monetary easing measures if it is going to win its battle against deflation with a sales tax hike due in April.
There had been speculation of an expansion of the asset-purchasing programme after figures last week showed a sharp slowdown in July-September growth, which raised concerns about the strength of the economy.
"Japan's economy has been recovering moderately," the BoJ said in a statement, adding that "inflation expectations appear to be rising on the whole".
"The year-on-year rate of increase in the CPI (consumer price index) is likely to rise for the time being."
The yen was little changed after the widely expected announcement. The dollar bought 104.39 yen compared with 104.37 yen earlier Friday, with the greenback bolstered by the US Federal Reserve's announcement on Wednesday that it would wind-down its own stimulus from January.
BoJ Governor Haruhiko Kuroda is to hold a regular post-meeting press conference at 3:30pm local time (0630 GMT).
Kuroda unveiled the BoJ's vast asset-buying scheme in April as part of a broader plan by Prime Minister Shinzo Abe to reinvigorate the economy and eradicate deflation with a policy blitz.
Reversing years of falling prices is a key goal of the BoJ's plan, which aims for 2.0 percent inflation in two years, although some analysts are growing increasingly sceptical of that ambitious timeline.
"We... maintain our main scenario that the BoJ will have no choice but to ease further in order to achieve the 2.0 percent inflation target," Credit Agricole said ahead of Friday's announcement.
October figures showed a key inflation indicator rising at its fastest pace since the late 1990s as Japan sank into years of deflation, which encourages consumers to put off spending in the hope goods will be cheaper down the road, hurting producers.
Cautious firms have been reluctant to usher in widespread pay or capital spending rises after years of lacklustre consumer demand weighed on their expansion.
"Overall, the (October) data suggests that the Japanese economy is emerging from 15 years of almost completely constant deflation, thus there isn't any real reason why the BoJ would need to increase stimulus" right now, said Chris Tedder, analyst at Sydney-based Forex.com.
"However, this may change next year when the government increases the sales tax."
The BoJ referenced April's tax hike to 8.0 percent from 5.0 percent, saying consumer demand would jump ahead of the rise before dipping afterwards.
While the increase is seen as crucial to chopping Japan's eye-watering national debt -- proportionately the worst among rich nations -- there are fears it will derail its economic recovery.
To counter the threat of higher taxes denting consumer demand, Tokyo has approved a spending package worth almost $54 billion to help prop up the economy, which led growth among G7 nations in the first half of the year.
"While Tokyo is going to alleviate some of the pressure... further support may also be needed from the BoJ if the economy reacts to the tax worse than expected," Tedder said.