BOJ keeps lax monetary policy, forecasts steady growth

BOJ keeps lax monetary policy, forecasts steady growth

BOJ keeps lax monetary policy, forecasts steady growth

"To attain a durable increase in inflation and growth, a comprehensive policy approach that enhances monetary accommodation with a supportive fiscal stance and reforms to labor market policies is needed", it said.

The BOJ kept its policy unchanged, as expected, but Governor Haruhiko Kuroda conceded that public perceptions of future price rises remained subdued, suggesting the central bank will significantly lag its US and European peers in exiting its massive stimulus program. "The divergence between their price outlook and that of private economists continues, but it shouldn't be a big problem for now because it's been that way for a long time and few economists believe the BOJ's projections".

The Japanese government bonds traded flat after the Bank of Japan (BoJ) left its benchmark policy rate unchanged at its monetary policy meeting held earlier today. For fiscal 2018 - the year ending in March 2019 - the bank forecasts 1.3% growth, up from 1.1%.

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"Japan's economy is likely to continue expanding and maintain growth at a pace above its potential, mainly through fiscal 2018", the bank said in its statement.

Treasury bonds remained positive even as the outline raised the risk of bigger deficits and United States stocks slipped. This is because many expect consumer prices to pick up somewhat later this year, thanks to rising oil costs and the relatively weak yen.

At a post-meeting news conference due 0630 GMT, BOJ Governor Haruhiko Kuroda is likely to remind markets the Japanese central bank is nowhere near an exit from its massive stimulus, analysts say. Talking about a specific exit strategy now would cause undue confusion in markets.

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But critics say the central bank can not sustain the current framework if its price target remains elusive for too long, as its heavy bond buying is already drying up market liquidity.

The BOJ upgraded its view of the economy, describing it as headed toward an "expansion", its first use of that word in almost a decade. The latest set of February inflation figures from Japan have exhibited little signs of taking off. Headline CPI growth regressed to 0.3% year-on-year (YoY) while core CPI, or CPI excluding fresh food, made only slight headway in positive territory to 0.2% YoY.

After three years of heavy money printing failed to drive up inflation, the BOJ revamped its policy framework last September to one better suited for a long-term war against deflation.

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