BOJ seen on hold, confident of recovery for now
By Leika Kihara
TOKYO (Reuters) - The Bank of Japan is expected to hold off on easing monetary policy on Thursday, convinced that the country's economy is headed for a moderate recovery as strength in domestic demand eases the pain from slowing global growth.
Some market players had expected the BOJ to follow up on last week's stimulus measures by the central banks of Europe, Britain and China with its own monetary expansion in a coordinated move to ease the pain from the global slowdown.
But with no clear signs yet that Japan's recovery prospects are under threat, the BOJ sees little reason to tap its depleted arsenal now unless a sudden spike in the yen hits business sentiment.
The central bank in fact may offer a slightly more upbeat view on the economy than last month, when it said growth was starting to pick up, as Monday's tankan survey showed that companies are more optimistic about business conditions and plan to increase capital expenditure this fiscal year.
"Recent Japanese indicators, including factory output and the tankan survey, aren't that bad. They don't point to the need for additional monetary easing by the BOJ," said Naoki Iizuka, senior economist at Mizuho Securities in Tokyo.
"But there are a considerable number of market players still expecting the BOJ to ease in July, so a lack of action could be taken as a negative surprise and push down stock prices."
The central bank is widely expected to keep its policy rate at a range of zero to 0.1 percent, and hold off on easing policy such as a further increase in its 40-trillion-yen ($503 billion) asset buying program.
CPI FORECASTS ROUGHLY INTACT Continued...