"Japan's economy continues to recover moderately as a trend, but there is some weakness in production ... after the sales tax hike"
- Bank of Japan
The Bank of Japan has finally admitted the fact the sales tax hike has had a notable negative impact on the world's third biggest economy, as industrial production, a key driver of economic growth, was showing signs of weakness. The central bank decided to remain pat on the monetary policy, but eliminated the need to expand it soon. The central bank kept its pledge to increase the monetary base at an annual pace of 60 trillion yen to 70 trillion yen ($643 billion). Haruhiko Kuroda, Bank of Japan Governor, adhered to a thought that a weak Yen is beneficial for the Japanese economy, but he admitted that further Yen drops will hit small firms and households by boosting import prices. The Yen's effective exchange rate against a basket of currencies stood at 77.2 in August, lower than its 10-year average of 92.93 and near a more than two-decade low of 74.91 reached in January. Its nominal rate rose above 110 per Dollar last week for the first time since 2008.
The BoJ policy makers maintained their assessment that the country's economy "continues to recover moderately as a trend", but marked down their assessment of industrial production. Kuroda also stressed that officials will consider embarking on additional easing measures should the BoJ's goal of reaching 2.0% inflation goal in the next fiscal year becomes difficult.
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