BOJ Holds Policy Warns About Tax Hike Effects

The Bank of Japan on Tuesday kept its monetary policy steady, saying the Japanese economy is recovering despite the fallout from the consumption tax hike in April, but it downgraded its assessment of industrial output.

The decision came as market participants perceive that the BOJ will face difficulty achieving its 2 percent inflation goal within its set time frame of about two years since it introduced the current aggressive easing in April 2013. The BOJ will release its latest growth and inflation forecasts later this month.

“Japan’s economy has continued to recover moderately as a trend,” the BOJ said in a statement, sticking to an earlier overall assessment while adding that “some weakness particularly on the production side has been observed.”

The nation’s industrial output has been recovering only slowly as the tax increase has weighed on private consumption. Among notable signs, auto sales in Japan have slumped following the 3-percentage-point tax rise to 8 percent on April 1.

“Industrial production has recently been showing some weakness, due in part to inventory adjustments,” the BOJ said, revising downward its evaluation from September when it said production “has recently shown some weakness, although it has continued to increase moderately as a trend.”

via Mainichi

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza