"The inaction signals confidence in the economy. The BOJ will have to take an additional step to achieve its inflation target at some point, and the second meeting in April is the most likely timing."
- Maiko Noguchi, senior economist at Daiwa Securities Co. and a former central bank official
As it was widely expected the Bank of Japan refrained from additional stimulus measures, citing a continuing economic amelioration and improved sentiment, while also mentioning growing uncertainty ahead of implementation of higher sales tax next April. Kuroda's comments were not a surprise for markets, hence market reaction was quite limited. USD/JPY inched lower just 0.01% hitting 97.26 and is approaching a strong support around 96.88- the lowest since August 28. Amid U.S. government shutdown and growing demand for the Yen, this level may be topical. Though BoJ's decision to maintain the current pace of monetary policy, pumping 60-70 trillion yen into the economy, unchanged, had little effect on the Yen. While the economy is on the path to achieve 2% inflation as planned, along with igniting inflation in the world's largest economy, the government is trying to reduce the enormous government debt, which is currently hovering around 250% of GDP. Some analysts have already expressed their concerns the tax hike will weigh on consumer demand, countering BoJ's efforts to end decades of deflation. At the same time, Kuroda said there are no risks for inflation, and assured markets BoJ would be willing to adjust its unprecedented stimulus if the tax hike posed a threat to its inflation target. Much can be said for combination of fiscal stimulus and rapid monetary easing; however, it is obvious that Abenomics is positively affecting the economy, as GBP expanded 4.1% annually in Q1, and posted a healthy growth of 3.8% in Q2.
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