The Bank of Japan retained its stimulus program even as the domestic economy contracted in the second quarter, casting doubts on its ability to achieve its inflation target the next year.
The Policy Board of the BoJ governed by Haruhiko Kuroda decided by an 8-1 majority vote to maintain its target of raising the monetary base at an annual pace of about JPY 80 trillion.
Takahide Kiuchi proposed to raise the monetary base by about JPY 45 trillion annually.
“The economy has continued to recover moderately, although exports and production are affected by the slowdown in emerging economies,” the bank said.
Exports and industrial production have recently been more or less flat, the bank said. This was a downgrade from its earlier view that exports and industrial production have been picking up.
Inflation is likely to be about zero percent for the time being due to the effects of the decline in energy prices.
The bank maintained its assessment that inflation expectations appear to be rising on the whole from a somewhat longer-term perspective.
The bank’s prediction that its 2 percent inflation target will be reached by the next summer looks increasingly at odds with reality, Marcel Thieliant, an economist at Capital Economics, said.
According to Thieliant, more cautious assessment of economic conditions suggests that policymakers will announce additional monetary stimulus before too long.
The BoJ had earlier expanded the stimulus in October 2014, when a decline in crude prices exerted pressure on its ability to achieve inflation target.
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