Japan's central bank
maintained its goal of boosting the monetary base by an annual 60-70 trillion
yen and voiced growing confidence about rising investment and industrial
production though it also acknowledged that exports had "recently leveled
of more or less."
The Bank of Japan (BOJ), which
embarked on an aggressive easing campaign in April 2013 to rid the country of
15 years of deflation, repeated that the economy "is expected to continue
a moderate recovery as a trend, while it will be affected by the front-loaded
increase and subsequent decline in demand prior to and after the consumption
tax hike."
Japan's government is raising the
sales tax rate to 8 percent from 5 percent on April 1 to reduce its deficit and
slow down the growing debt, and there is speculation that the BOJ will boost its
stimulus to make up for any economic slowdown and to ensure that the bank meets
its target of boosting inflation to 2 percent.
However, BOJ officials have often downplayed this speculation, arguing the
economy can weather the impact of the tax rise. In 1997, when the sales tax was
raised to 5 percent from 3 percent, the economy went into recession.
Last month a key aid to Prime Minister Shinzo Abe told Reuters that the
BOJ can wait until summer and evidence on how the economy is handling the
impact of the tax rise before it decides whether to ease policy further, a sign
that the government is not putting any pressure on the central bank to
immediately increase its stimulus measures.
Japan's Gross
Domestic Product expanded by a lower-than-expected 0.2 percent in the fourth
quarter from the third quarter for annual growth of 2.6 percent, still the
third quarter in a row with accelerating growth.
Japan's
consumer prices have been rising since June following 12 consecutive months of
deflation though inflation eased slightly to 1.4 percent in January from
December's 1.6 percent.
The BOJ repeated that inflation,
excluding the impact of the tax rise, is likely to be around 1.25 percent for
some time.
Japan's exports fell to 5.252 trillion yen in
January from December's 6.109 trillion, the lowest since January 2013.
"Overseas economies - mainly advanced economies - are starting to
recover, although a lackluster performance is still seen in part," the BOJ
said, repeating last month's statement.
The yen has been
weakening since October 2012 - it was trading at 78 to the U.S. dollar on Oct.
1, 2012 - through 2013 when it ended at 105.28 to the dollar. This year it has
firmed slightly but has remained above 100 to the dollar and was trading at 103.35
to the dollar earlier today.
In April
last year, the BOJ said it aimed to expand Japan's monetary base to 270
trillion yen by the end of 2014 from 138 trillion at the end of 2012. By the
end of 2013, the monetary base was projected to rise to 200 and in a separate
statement today the BOJ said it hit 202 trillion by the end of December 2013
and 205 trillion by the end of February.
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