BOJ to keep monetary policy on hold as economy improves

Mon Aug 5, 2013 4:13am EDT
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By Stanley White

TOKYO (Reuters) - The Bank of Japan is expected to keep monetary policy on hold at a review this week, as its unprecedented quantitative easing and government stimulus gradually spread through the economy.

Since the BOJ's last meeting there have been improvements in the economy, including the first rise in core consumer prices in more than a year, the first increase in summer bonuses in three years and a decline in the jobless rate to a 4-1/2-year low.

Many members of the BOJ are confident that the economic recovery is on track, but some officials want to see more data to measure the strength of business investment, sources familiar with the BOJ's thinking said.

The BOJ has projected that Japan's economy will resume a moderate recovery and last month it said growth was "picking up," which marked the seventh consecutive month of upgrades.

The two-day review will conclude on Thursday.

The BOJ is widely expected to keep monetary policy steady by maintaining its pledge of increasing base money, or cash and deposits with the central bank, at an annual pace of 60 trillion to 70 trillion yen ($600 billion-$700 billion).

Policy board members could discuss whether or not to upgrade their assessment of the economy given that there are growing positive signs from prices, the labor market, wages and consumer spending.

However, there are still some areas of concern, sources say.   Continued...

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