The Bank of Japan kept monetary policy steady and raised its assessment on capital expenditure on Wednesday, reassured by growing evidence the economy can withstand the pain from a sales tax hike without additional monetary stimulus.
Governor Haruhiko Kuroda was expected later in the day to reiterate his optimism that Japan is on course to meet the bank’s 2 percent inflation target about a year from now, dampening already diminishing market expectations of near-term monetary easing.
Such comments may further strengthen the yen, which held near a 3-1/2-month high against the dollar as hopes of further BOJ action faded, analysts say. The BOJ also added a line in its statement stressing that its quantitative easing policy has been “exerting its intended effects” and removed a phrase describing Japan as in deflation, underscoring its confidence about meeting its price target without additional stimulus.
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