The Bank of Japan offered a bleaker view on exports and output a week before data is expected show the biggest contraction in economic activity since the global financial crisis, heightening concerns a rebound may be delayed and increase pressure for further monetary easing.
But BOJ Governor Haruhiko Kuroda remained upbeat about the outlook for the world’s third-biggest economy, underscoring the central bank’s conviction that no fresh near-term stimulus is required to shake off the effects of a sales tax hike in April.
“Japan’s economy is likely to continue recovering moderately with the effect (of an April sales tax increase) seen gradually subsiding,” Kuroda told a news conference on Friday.
“Exports and output have been weakening,” he said. “But a positive economic cycle remains in place as job and income conditions steadily improve.”
Kuroda said exports are set to recover as U.S. and Chinese growth picks up, adding that geo-political risks, such as escalating tensions in Ukraine, will not force the BOJ to alter its upbeat outlook of the global economy at least for now.
He also said Japan’s economy was likely to expand above its potential, deemed at around 0.5 percent or lower, in the current fiscal year from April despite an expected contraction in the April-June quarter blamed on the tax hike.