BoJ revises export outlook, pat on policy

Note: This section contains information in English only.
Source: Dukascopy Bank SA
© Dukascopy Bank SA
"Japan's economy has continued to recover moderately, and a front-loaded increase in demand prior to the consumption tax hike has recently been observed"
- The Bank of Japan


Monthly meetings of the Bank of Japan were usually shaking markets, as any dovish or unconvincing comments from the central bank provided a massive sell-off of the Japanese Yen, as investors are making their bets about when more stimulus will be announced. With only one month left before the looming tax hike, the central bank is starting to worry about the future outlook, even though they decided to stay pat on its policy during March's gathering.

The Bank of Japan announced its readiness to continue increasing the monetary policy at the rate of 60-70 trillion yen per year, in attempt to end a decade-long stretch of deflation and subdued growth in the world's third largest economy. Governor Haruhiko Kuroda is expected to face the biggest obstacle to hit his bid of achieving 2% inflation, as the first tax hike in 17 years squeezes companies' and households' spending. What is more important is the fact the central bank has lowered its exports outlook in an alarming signs global demand will continue to disappoint. At the same time, however, policymakers raised its forecast on capital expenditure and sounded more confident about industrial production, suggesting domestic demand will still be improving even despite the consumption tax hike.

Analysts believe Kuroda will introduce fresh stimulus around the middle of this year, as it will be harder to reach the 2% inflation goal.

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