BOJ says economy recovering, unfazed by China slowdown

Thu Jul 11, 2013 5:40am EDT
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By Leika Kihara and Stanley White

TOKYO (Reuters) - The Bank of Japan said the world's third-largest economy was finally recovering as it kept monetary policy steady, its most optimistic view in two-and-half years reflecting the impact of a weakening yen and its massive monetary stimulus on activity.

BOJ Governor Haruhiko Kuroda said on Thursday while overseas economies were weaker than expected that would be offset by robust domestic consumer spending and a pick-up in capital expenditure, and so he remained confident of meeting a target of lifting inflation to 2 percent in roughly two years.

He said the BOJ was monitoring developments in China, Japan's main trading partner, as growth slowed and as authorities tried to rein in sharp growth in informal lending.

"Chinese policymakers have clearly shifted to a stance of emphasizing the quality of economic growth rather than speed," Kuroda told a news conference after the BOJ's policy review.

"Still, there's no change to our forecast that China's economy will continue to achieve strong, stable growth."

Earlier, the central bank's board voted unanimously to maintain its pledge of increasing base money, or cash and deposits at the central bank, at an annual pace of 60 trillion to 70 trillion yen ($600 billion-$700 billion).

"Japan's economy is starting to recover moderately," the central bank said in a statement after its two-day meeting, revising up its assessment for the seventh straight month.

The last time the BOJ used the word "recover" to describe the economy was in January 2011, two months before the March 11 earthquake and tsunami that devastated the country.   Continued...

A man walks past the Bank of Japan headquarters in Tokyo July 5, 2013. REUTERS/Toru Hanai