The Bank of Japan has kept its policy settings on hold, while noting a broad drop-off in demand in the wake of the consumption-tax increase pushed through in April. The latest no-change comes amid growing doubts that the BoJ can hit its 2 per cent inflation target within the timeframe originally outlined, in the absence of further yen weakness and without help from the government in removing obstacles to higher growth.
In its statement on Friday, the BoJ made repeated references to the “front-loading” of demand in the months leading up to the tax increase, from 5 per cent to 8 per cent, and observed subsequent dips in private consumption, housing investment and industrial production.
Yet policy makers did not judge the setback serious enough to warrant any immediate enhancement of the BoJ’s aggressive easing programme, which was launched in April 2013 with the aim of lifting consumer price inflation to 2 per cent within about two years.
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