BOJ to hold fire but exports seen as a concern

TOKYO Mon Mar 10, 2014 6:07pm EDT

A security guard salutes at the entrance of the Bank of Japan building in Tokyo January 22, 2014. REUTERS/Yuya Shino

A security guard salutes at the entrance of the Bank of Japan building in Tokyo January 22, 2014.

Credit: Reuters/Yuya Shino

Related Topics

TOKYO (Reuters) - The Bank of Japan is expected to maintain its massive monetary stimulus on Tuesday on a view the economy can weather a sales tax increase in April without extra support, although there is expected to be some concern about weakness in exports.

The BOJ board can point to strength in industrial output, labor demand and consumer spending to back its view the economy will continue a gradual recovery and its 2 percent inflation target is achievable over the next 12 months or so.

There is some concern within the BOJ about slow exports, but pessimists are not expected to have the numbers to tip the votes towards a downgrade of the central bank's stance that export growth will eventually rebound.

After its two-day meeting ends on Tuesday, the central bank is widely expected to maintain its pledge of increasing base money, its key monetary policy gauge, at an annual pace of 60-70 trillion yen ($590-$690 billion).

The BOJ launched the stimulus last April, saying it would lift inflation to 2 percent within around two years via aggressive asset purchases as it sought to end 15 years of deflation.

A Reuters poll last month showed economists expect the BOJ to ease policy further around the middle of the year, as they say it will otherwise be difficult to meet the inflation target.

With no policy changes expected, investors will be looking for signs of whether BOJ Governor Haruhiko Kuroda will stick to his economic assessment when the central bank reviews its forecasts next month.

Kuroda and other officials have been confident the economy can survive the short-term shock when the sales tax rate rises to 8 percent from 5 percent on April 1.

Core consumer inflation reached a five-year high of 1.3 percent in January, supporting the BOJ's view that it will stay above 1 percent and accelerate again later this year. Some BOJ officials think prices are rising a tad faster than expected.

Japan posted a record current account deficit in January, undermining the BOJ's argument that exports will pick up pace as the U.S. economy recovers.

However, it will likely take a more extensive slowdown in exports to convince optimists in the BOJ to change their assessment.

(Editing by Chris Gallagher)

FILED UNDER:
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

Find your dream retirement town

Florida? Hawaii? Reuters has teamed up with Zillow to give you the power to customize a list of your best places to retire.  Video | Full Article 

Recommended Newsletters

Reuters U.S. Top News
A quick-fix on the day's news published with Reuters videos and award-winning news photography and delivered at your choice of one of four times during the day.
Reuters Deals Today
The latest Reuters articles on M&A, IPOs, private equity, hedge funds and regulatory updates delivered to your inbox each day.
Reuters Technology Report
Your daily briefing on the latest tech developments from around the world from Reuters expert tech correspondents.