BoJ Expected to Keep Positive Outlook on the Economy

The Bank of Japan began a two-day policy meeting Wednesday, with market participants expecting the central bank to keep policy steady and stick to its brisk view of the economy despite signs of a negative fallout from the April consumption tax hike.

The BOJ will announce Thursday that it will continue massive asset purchases from financial institutions to flood the economy with more money and lift the nation’s inflation rate to 2 percent, sources close to the matter said.

The nine-member Policy Board, headed by BOJ Governor Haruhiko Kuroda, is expected to maintain its basic assessment of the economy after saying last month that it “has continued to recover moderately” while noting some downward effects of the consumption tax hike on private consumption.

Kuroda will hold a press conference Thursday and could possibly show reluctance to additionally ease monetary policy in view of the prospect that the tax hike impact will be temporary.

The BOJ warned last month of weakness in Japanese exports and industrial output. But it also said a positive cycle of economic growth has been in place, helped by continued improvements in the employment and income situation.

Recent data showed industrial production slightly recovered in July although the tax hike and subsequent weak consumption have kept manufacturers, particularly carmakers, on edge.

The unemployment rate is relatively low while wages are rising on average. However, household spending has marked significant falls in recent months following the demand surge ahead of the April 1 tax hike.

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