-Hidenobu Tokuda, senior economist at Mizuho Research Institute
The Bank of Japan decided to keep its current monetary settings unchanged, albeit it downgraded its economic growth outlook for fiscal 2015. As widely anticipated, the BoJ kept intact its pledge of expanding base money at an annual pace of 80 trillion yen through aggressive asset purchases. Policy makers highlighted that the central bank's policy would continue as long as it is necessary to reach price stability target of 2%. Yet, most economists expect the BoJ to ramp up its simulative efforts later this year.
At the same time, the central bank downgraded its GDP forecast to 1.7%, compared with its 2% growth outlook in April. Japan's economy likely entered a soft patch amid sluggish exports and household spending, though economists forecast growth to pick up in the July-September quarter as rising wages underpin consumption. In addition to that, the BoJ trimmed its 2015 inflation forecast to 0.7%, down from 0.8%. The estimate for fiscal 2016 was slashed to 1.9%, while for fiscal 2017 to 1.8%, down from 1.9%. While many analysts doubt consumer prices growth will accelerate quickly, the BoJ policy makers are confident a solid economic recovery will help drive inflation to 2% by around September next year.
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