Bank of Japan stands pat as Inflation Weakens

The Bank of Japan left its policy unchanged Thursday, sticking to the view that Japan is still on track to achieve 2% inflation despite stagnating price growth and lingering speculation that further action is needed.

The central bank decided to keep its annual asset purchases at ¥80 trillion (US$672.2 billion), ignoring a call from an influential lawmaker urging the bank to increase its purchases to ¥90 trillion.

Kozo Yamamoto, known as a staunch proponent of large-scale easing and a close ally of Prime Minister Shinzo Abe in the ruling Liberal Democratic Party, said last week that the BOJ needed to ease at the meeting, as the economy is still struggling to shake off a higher tax burden that took effect a year ago.

The BOJ’s inaction comes ahead of the release later in the day of the bank’s semiannual outlook report in which the policy board could illustrate the trajectory of inflation reaching its 2% in fiscal 2016 and stabilizing around there the following year. It may cut its previous projection for a 1.0% gain in prices for the current fiscal year that started this month amid sluggishness in consumption and downside risks to exports.

Source: Market Watch