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The announcement came a day after fresh data showed the world’s third-largest economy grew faster than expected in the first quarter, but it sent the yen rallying and stocks tumbling as investors were left disappointed.
“Japan’s economy has been picking up,” the bank said, while capital spending by the nation’s firms “appears to have stopped weakening”.
In April, new leadership at the BoJ — hand-picked by prime minister Shinzo Abe — vowed to hit a 2 percent inflation target within two years, jack up asset purchases including government bonds and double the money supply.
The ambitious target, a key part of the “Abenomics” plan to stoke the deflation-plagued economy, is aimed at reversing years of falling prices that have crimped private spending and business investment.
Yesterday, the bank repeated its determination to press on with aggressive monetary easing for “as long as it is necessary”. It added that a board member’s proposal to push back the inflation target’s time frame had been voted down, pointing to a possible erosion in confidence over the plan.
Although Japan remains mired in deflation, BoJ chief Haruhiko Kuroda pointed out that the new-look bank’s plan is just two months old.
“In terms of the development of the real economy, we are on track,” he told a Press briefing yesterday.
Revised data on Monday showed that Japan’s annualised growth came in at 4,1 percent in January-March, up from a preliminary reading of 3,5 percent and suggesting Abe’s strategy, which includes huge government spending, is bearing fruit.
Consumer confidence improved in May over the previous month, while a government survey yesterday showed a jump in confidence among large Japanese firms in the second quarter as hopes grow that the yen’s tumble, which makes Japanese products more competitive abroad, will help exports rebound.
However, BoJ policymakers said there was still a “high degree of uncertainty” caused by the sovereign debt troubles in key export market Europe and the pace of a recovery in the US economy.
Mixed US economic data has fuelled speculation the US Federal Reserve will hold off cutting back on its US$85 billion-a-month bond-buying programme, known was quantitative easing, that is aimed at stoking the world’s largest economy.
The BoJ decision, which comes after the European Central Bank and Bank of England held steady after policy meetings last week, sent investors running.
The dollar dived to 97,98 yen from 98,94 yen earlier in the day, which in turn sent the benchmark Nikkei 225 stock index tumbling 1.45 percent by the close.
“The decision is likely to disappoint the market and fuel yen-buying sentiment,” said Takahiro Sekido, economist with the Bank of Tokyo-Mitsubishi UFJ.
“However, he added “there is room for fresh measures at the next meeting”. — AFP.
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