hold fire, but exports seen as a concern
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[March 11, 2014]
By Stanley White
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
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.
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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)
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