- Hiroshi Nakaso, BoJ Deputy Governor
The Bank of Japan is likely to keep its positive inflation outlook even as it revised its economic growth forecast downwards for this fiscal year in an October report, suggesting that the central bank will not ease policy further at least until the end of 2014. Nevertheless, policy makers remain cautious about exports outlook, a soft part of the Japanese economy that has failed to improve despite the support from a weaker Yen that provides Japanese exporters a competitive edge overseas. The Japanese government kept its economic outlook unchanged at its monthly report, arguing that the world's third largest economy is "expected to recover moderately" as the effect of a sales tax hike in April subsiding gradually. Japan's economy contracted 6.8% in the second quarter due largely to the tax-hike, prompting many analysts to downgrade their growth forecasts for the year ending in March to around 0.5%, just half the 1.0% expansion projected by the BOJ in July.
On top of that, the Bank of Japan is pushing to extend the global reach of the country's currency and bonds as part of a broader attempt to modernize Japanese financial markets. By trying to overhaul the international trading process for Japanese government bonds and the Yen, the BOJ is supporting Prime Minister Shinzo Abe's growth strategy, albeit in a much less visible way than the dramatic monetary easing programme it has embarked on for the past year and a half.
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