- Title: JAPAN-ECONOMY/BOJ BOJ stands pat on policy
- Date: 15th September 2015
- Summary: TOKYO, JAPAN (FILE - AUGUST 17, 2015) (REUTERS) VARIOUS OF EXTERIOR OF TOKYO'S BANK OF JAPAN
- Embargoed: 30th September 2015 13:00
- Keywords:
- Location: Japan
- Country: Japan
- Topics: General
- Reuters ID: LVAE0LCOBM40E9XF94RQ6YXNV9E8
- Aspect Ratio: 16:9
- Story Text: The Bank of Japan (BOJ) held policies unchanged following its policy meetings on Tuesday (September 15), confident the economy can weather a hit from China's slowdown and weak demand from the rest of Asia.
BOJ Governor Haruhiko Kuroda, at a news conference following the meeting, maintained his optimism on Japan's economic outlook.
"As a whole, Japan's economy is recovering despite exports and industrial output being affected by slowdown in emerging economies," Kuroda told reporters.
A run of poor data, including weak exports, feeble wage growth and soft household spending, has ramped up pressure on the BOJ to expand its already massive stimulus programme to reflate the economy, which contracted in the second quarter.
In a possible sign that its conviction about a solid third-quarter recovery may be wavering, the BOJ cut its assessment on exports and output to say they were "more or less flat." It also offered a bleaker view on overseas economies, warning that emerging markets were slowing.
As widely expected, the BOJ maintained its pledge to increase base money at an annual pace of 80 trillion yen ($665 billion) via aggressive asset purchases such as government bonds and some riskier assets such as exchange-traded equity funds.
In a sharp downgrade of views from just a few months ago, analysts now expect only a feeble economic rebound in the current quarter as China's slowdown hits exports, heightening market expectations that the BOJ may be forced to act again later this year.
In a sign that cooling demand in China and elsewhere in Asia is taking a toll, a Reuters poll showed Japanese manufacturers' confidence slumped the most in a year in September.
But Kuroda maintained a positive outlook on China's growth despite the recent slowdown.
"China's economy will continue to grow steadily as it receives support from the government's monetary, fiscal policies," he said.
Kuroda also laid out the requirements the Chinese yuan had to meet for its internationalization.
"Whether or not the Chinese yuan joins the basket depends on whether it is used widely in trade, and whether it is considered, in the English term, a 'freely usable currency'. This (joining the basket) will be decided if these criteria are met," he said.
Fears of a China-led slowdown prompted heavy selling in global markets earlier this month by investors already worried about whether the recovering U.S. economy can withstand an interest rate hike which could come as early as this week.
But Kuroda commented that an increase in interest rate would be a reflection of a healthy economy.
"If the US decides to increase interest rates at some point, that would mean that the FOMC has stronger confidence in the recovery of the US, in other words, that would mean that the U.S. economy will continue recover and grow steadily," he said.
The BOJ is aiming to accelerate inflation to 2 percent by around next September, hoping that an improving economy will prompt companies to raise wages and prices. But many analysts doubt prices will pick up so quickly, with inflation having ground to a halt due to soft consumption and weaker oil prices.
A shift in the BOJ board's composition means if Kuroda were to pull the trigger, he could count on more votes than last October, when his unexpected proposal to expand stimulus won by a razor-thin margin.
But many BOJ policymakers are wary of acting now, concerned about the risk of diminishing returns if they expand the huge asset buying programme, which is already drying up bond market liquidity. - Copyright Holder: FILE REUTERS (CAN SELL)
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