The Bank of Japan (BOJ) on Friday voted unanimously to continue to expand its monetary base, stating that the domestic economy is on a moderate recovery path despite the consumption tax hike in April, while raising its view on overseas economies.
Following the bank's two-day policy meeting, BOJ Governor Haruhiko Kuroda said he remains confident the bank will hit its 2 percent inflation target next year, as the central bank's monetary base target of buying government bonds and financial assets from banks remains on track, with the downside effects of the April 1 tax hike from 8 to 10 percent expected to wear off.
The BOJ chief also reiterated the bank's view made by statement earlier in the day that the domestic economy is on a moderate recovery track.
"The negative effects of the consumption tax hike will diminish in this summer or later. It is rather certain the economy will gradually return to growth beyond its potential," Kuroda told a news conference following the conclusion of the policy board's two- day meeting.
The bank's nine-member Policy Board unanimously voted to maintain its year-long current monetary policy of expanding its monetary base at an annual pace of 60-70 trillion yen (around 590- 688 billion U.S. dollars), through the purchases of government bonds and other assets.
"The Bank of Japan will conduct money market operations so that the monetary base will increase at an annual pace of about 60 to 70 trillion yen," the BOJ said in a statement.
The bank also upheld its view of Japan's economy for a ninth successive month stating that, "Japan's economy has continued to recover moderately as a trend," although the bank noted that the hike in consumption tax in April had dented domestic demand, household spending and business investment.
"The subsequent decline in demand following the front-loaded increase prior to the consumption tax hike has been observed," the BOJ said.
But with consumer prices rising 3.2 percent in April, with core prices up 1.5 percent, and a rebound in consumer confidence and sentiment for the economy's future in May, according to the latest government statistics, leading economists here corroborated Kuroda 's view that, despite an expected economic contraction in the three months through June, Japan's economy will see an uptick thereafter and is on track to reverse decades of deflation next year.
The BOJ also confirmed it believes overseas economies are recovering, from a previous view in May that the recovery in foreign economies was embryonic. It said that employment growth in the U.S. particularly had contributed to its upward revision.
"Overseas economies are recovering, particularly in advanced economies," the bank said in a statement. "Private consumption and housing investment have remained resilient with the employment and income situations improving," the bank said, adding that, " business investment has increased moderately as corporate profits have improved, while exports have more or less leveled off recently."
Economists here said that the BOJ's quantitative and qualitative monetary easing has aided both financial markets, prices and outlooks, as well as the overall economy.
The bank's latest policy meeting follows the government unveiling a draft of its economic growth strategies earlier this week, ahead of Prime Minister Shinzo Abe's highly-anticipated overhaul of economic policies expected to be formally announced this month.
While the BOJ has kept pat on its monetary policy, economists here believe that, in twine with the government's ardent push for economic growth, as outlined in its draft strategies to be confirmed by Abe, the central bank will likely boost its stimulus measure at some point between October and the end of the year.