BOJ maintains massive stimulus, offers brighter view on economy

TOKYO, Dec 19:  The Bank of Japan maintained its massive monetary stimulus on Friday and offered a brighter view of the economy, clinging to hope that joint efforts with Prime Minister Shinzo Abe to revitalise the economy will prod companies into boosting wages and investment.    The rate review was the first since Abe’s landslide victory in a Dec. 14 election that gave him a fresh mandate to continue efforts to pull Japan out of 15 years of grinding deflation.
Having just expanded stimulus seven weeks ago, the BOJ maintained its pledge of increasing base money, or cash and deposits at the bank, at an annual pace of 80 trillion yen ($674 billion) through aggressive asset purchases.    Unfazed by the recent market turbulence and fragile consumer sentiment, the BOJ revised up its assessment of the economy from November, when it pointed to weak signs in  output.
‘The economy continues to recover moderately as a trend’ with the pain from a sales tax hike in April waning as a whole, the BOJ said in a statement on its policy decision.    It also revised up its assessment on exports and output in a sign of its confidence that the world’s third-largest economy is on track to rebound from a recession in the third  quarter.
Markets are focusing on BOJ Governor Haruhiko Kuroda’s news conference for hints on how continued sharp falls in crude oil prices, and a resulting slowdown in consumer inflation, will affect the central bank’s policy next year.    The governor is seen reassuring markets that the BOJ’s massive stimulus programme, dubbed ‘quantitative and qualitative easing’ (QQE), will remain intact well into next year, even as the U.S. Federal Reserve – having ended its massive stimulus easing – weighs when to start raising rates.    Kuroda may also repeat his calls for firms to increase wages and urge Abe to proceed with fiscal and structural  reforms.
Wage growth is key to the success of QQE. The programme aims to create a cycle in which companies spend their rising profits on wages, which in turn boosts consumption and spur sustained growth.
Slumping global oil prices, while beneficial for the economy, have added to headaches for the BOJ. Core consumer inflation hit 0.9 percent in the year to October and data due next week is set to show it slowed to 0.7 percent in November, according to a Reuters poll, well below the central bank’s 2 percent target.
The board likely kicked off debate on how recent oil moves may affect the price outlook, ahead of a quarterly review of its long-term forecasts in January. (agencies)

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