BoJ Minutes: Moderate Pace For Economic Recovery
The members of the Bank of Japan's monetary policy committee believe that the pace of the country's economic recovery remains moderate, minutes from the bank's policy meeting on January 20 and 21 revealed on Monday. They also noted that capital spending was on the upswing as corporate profits continued to grow. "Japan's economy has continued to recover moderately as a trend, and effects such as those of the decline in demand following the front-loaded increase prior to the consumption tax hike have been waning on the whole. Overseas economies -- mainly advanced economies --have been recovering, albeit with a lackluster performance still seen in part," the minutes said. The members did concede that they were likely to miss their desired inflation target of 2 percent following years of deflation - due mainly to tumbling energy prices. Citing lower crude oil prices, the BoJ downgraded its core inflation estimate for fiscal 2015 to 1 percent from 1.7 percent. But the central bank lifted the forecast for fiscal 2016 to 2.2 percent from 2.1 percent. "Inflation expectations appear to be rising on the whole from a somewhat longer-term perspective," the bank said. "The year-on-year rate of increase in the CPI is likely to slow for the time being, reflecting the decline in energy prices." At the meeting, the BoJ kept its monetary policy unchanged and lowered its near-term inflation forecast. The bank also extended its loan scheme by one year in order to encourage lending. The central bank also decided by an 8-1 vote to maintain its target of raising the monetary base at an annual pace of about JPY 80 trillion. The bank said major risks to the outlook are developments in the emerging and commodity-exporting economies, the prospects regarding the debt problem and the risk of low inflation rates being protracted in Europe, and the pace of recovery in the United States. The bank raised its fiscal 2015 growth outlook to 2.1 percent from 1.5 percent. For fiscal 2016, the bank projected 1.6 percent real growth instead of 1.2 percent. "Quantitative and qualitative monetary easing (QQE) has been exerting its intended effects, and the Bank will continue with the QQE, aiming to achieve the price stability target of 2 percent, as long as it is necessary for maintaining that target in a stable manner. It will examine both upside and downside risks to economic activity and prices, and make adjustments as appropriate," the bank said.
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