The Bank of Japan kept monetary policy steady on Friday but tempered its optimis...
TOKYO - The Bank of Japan kept monetary policy steady on Friday but tempered its optimism that robust exports and factory output will underpin growth, a nod to heightened overseas risks that threaten to derail a fragile economic recovery.
In a nod to the increased risks, the BOJ cut its assessment on overseas economies to say they are showing signs of slowdown. It also revised down its view on exports and output. The central bank also stuck to its view Japan’s economy is expanding moderately, but added a phrase that “exports and output have been affected by slowing overseas growth.” In January, it said only that the economy was expanding moderately.
Japan’s exports posted their biggest decline in more than two years in January as China-bound shipments tumbled. Factory output also posted the biggest decline in a year in that month, a sign slowing global demand was taking a toll on Japan Inc. And yet, subdued inflation has left the BOJ well behind other major central banks in dialling back crisis-mode policies, leaving it with little ammunition to battle the next recession.
Finance Minister Taro Aso said on Friday “things could go wrong” if the BOJ insisted too much on achieving 2 percent inflation. “No one in the public would be angry even if the inflation target isn’t achieved,” he told reporters.The biggest worry among BOJ policymakers is that weakening exports and output will hurt corporate sentiment, prompting firms to delay capital expenditure and wage hikes.
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