BOJ Set to Maintain Stimulus

The Bank of Japan is set to maintain its massive stimulus program on Friday and its optimism that a consumption-driven recovery will eventually take hold, helping achieve its ambitious inflation target around the middle of 2016.  At a post-meeting news conference, BOJ Governor Haruhiko Kuroda is likely to reiterate that he sees no imminent need to ease policy with improvements in the economy underpinning a broad uptrend in prices.

But he will also remind markets of the BOJ’s readiness to expand stimulus again if private consumption falters and discourages companies from raising prices, analysts say.  BOJ Deputy Governor Kikuo Iwata told parliament on Tuesday that inflation will likely accelerate late this year as consumers overcome the pain from last year’s sales tax hike and start to feel the benefit from lower fuel costs.

“The underlying trend of inflation is improving steadily,” Iwata said.  At a two-day rate review ending on Friday, the BOJ is widely expected to maintain its pledge of increasing base money at an annual pace of 80 trillion yen ($667 billion) through purchases of government bonds and risky assets.