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Bank of Japan holds fire on stimulus, says economy recovering

Update: June, 13/2014 - 10:00

TOKYO — The Bank of Japan on Friday held off expanding its stimulus programme and said the world's number three economy was recovering, despite fears a sales tax rise will dent growth.

Policymakers unanimously agreed to hold off any further measures after a two-day meeting. Investors are now awaiting a statement by BoJ governor Haruhiko Kuroda at about 3:30pm local time (0630 GMT).

The widely expected move comes as the US Federal Reserve winds down its own stimulus and just over a week after the European Central Bank launched unprecedented easing measures to counter the threat of deflation in the eurozone.

Japanese central bankers have held steady since launching a huge monetary easing blitz in April last year as they gauge the impact of a recent sales tax hike that has threatened to derail the country's nascent recovery.

On Friday, the BoJ acknowledged that consumer demand and industrial production had taken a hit after the April 1 tax hike, prior to which millions of shoppers went on a buying spree.

"Japan's economy is expected to continue a moderate recovery as a trend, while it will be affected by the subsequent decline in demand following the front-loaded increase prior to the consumption tax hike," the bank said in a statement.

Policymakers noted that overseas economies, particularly among major industrialised nations, were also recovering "albeit with a lacklustre performance still seen in part."

The BoJ's target of achieving 2.0 per cent inflation by next year was also on course, it said. — AFP

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