Bank of Japan to maintain stimulus, debate offering rosier view on economy

Wed Aug 7, 2013 5:48pm EDT
 
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By Leika Kihara

TOKYO (Reuters) - The Bank of Japan is expected to maintain its massive monetary stimulus on Thursday as its board debates whether growing bright signs from prices and the job market justify offering a rosier view on the economy.

Many central bankers are confident an economic recovery is on track, encouraged by data such as the first rise in core consumer prices in more than a year, the first increase in summer bonuses in three years and a fall in the jobless rate to a 4-1/2 year low.

The BOJ is thus widely expected to maintain its policy launched in April of nearly doubling the monetary base to 270 trillion yen ($2.8 trillion) by the end of 2014 as it seeks to end nearly two decades of deflation.

It is doing this through buying roughly 7.5 trillion yen ($77 billion) of bonds per month and other risky assets.

After its two-day policy review the BOJ may also revise up its assessment of the economy for an eighth consecutive month to say it is "recovering moderately," from July's assessment that the economy was "starting to recover moderately."

But that decision will be a close call as pessimists on the board fret about the slow pace of export growth and risks to the outlook such as the weakness in China's economy.

Some officials want to see more data to measure the strength of business investment, which is key to determining whether the flood of money the BOJ is pumping out will spur economic activity, sources familiar with the central bank's thinking said.

Many within the BOJ place a lot of importance on capital expenditure, arguing a solid increase in business investment is needed to ensure a self-sustaining economic recovery, but signals have been mixed.   Continued...

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