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.
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