* BOJ turns more cautious on exports
* BOJ's Kuroda says export weakness temporary
* Economists still worry about export demand
* BOJ more upbeat on capex, industrial production
By Stanley White and Tetsushi Kajimoto
TOKYO, March 11 The Bank of Japan maintained its
massive monetary stimulus on Tuesday on the view that growth in
the economy and consumer prices remains on track, but downgraded
its assessment of exports in a warning about external demand.
Governor Haruhiko Kuroda expressed confidence that the
weakness in exports is temporary and stuck with the BOJ's
overall assessment that the economy can continue a gradual
recovery, suggesting additional easing was not imminent.
The BOJ did upgrade its view of capital expenditure and
turned more optimistic about industrial production, showing more
confidence in domestic demand before an increase in the sales
tax scheduled for April 1.
However, this optimism is unlikely to ease concerns that
domestic demand will weaken after the tax hike and that exports
will not be strong enough to support growth, which could
increase calls for more monetary stimulus.
"It is not an atmosphere where the BOJ will ease immediately
even if it downgrades growth forecasts as core consumer prices
have been hovering in a range higher than previously expected,"
said Junko Nishioka, chief economist at RBS Securities.
"If the yen appreciates sharply and share prices plunge due
to geopolitical risks, including the Ukraine, the BOJ will have
As expected, the central bank on Tuesday maintained 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
The BOJ said exports had levelled off recently, which was a
downgrade from its assessment last month, when the central bank
said exports were on a recovery path.
Japan posted a record current account deficit in January due
to consistently weak exports, undermining the BOJ's argument
until now that exports would eventually pick up pace as the U.S.
Exports have been weak mainly due to a slowdown in Asian
economies and other emerging markets, Governor Haruhiko Kuroda
told reporters after the policy decision.
The closure of factories due to extremely cold weather in
the United States and the celebration of the Lunar New Year in
many Asian countries have also weighed on exports, he said.
Once these temporary factors subside, Japan's exports will
pick up as a recovery in the United States and Europe spreads to
Asia, he said. Kuroda also played down the geopolitical risks
posed by Russia's military intervention in the Ukraine.
"I see no reason to adjust policy now," Kuroda said. "The
economy can continue to expand above its potential growth rate."
Some economists worry that exports could remain week because
of structural changes in the economy as Japanese companies have
been shifting production capacity overseas.
The central bank said capital expenditure was showing clear
signs of recovery, an upgrade from its assessment last month
that business investment was recovering.
The BOJ also said industrial production was rising at a
slightly faster pace.
SALES TAX IMPACT
Recent strength in industrial output, and signs companies
are more willing to invest in factories and equipment as
consumers buy more goods before the tax hike, likely encouraged
optimists within the BOJ to take a more positive view of
The labour market is tightening, which also backs the BOJ's
view that the economy will continue a gradual recovery and its 2
percent inflation target is achievable over the next 12 months
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, but some economists
worry growth could falter.
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, excluding
the impact of the sales tax increase. Some BOJ officials think
prices are rising a tad faster than expected.
Due to differences in the way utility companies plan to
implement the sales tax increase, the tax hike will first add
1.7 percentage points to the annual inflation rate in April and
then 2.0 percentage points from May, Kuroda said.
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.