BOJ hails Fed tapering, sticks with its own massive stimulus

Fri Dec 20, 2013 5:15am EST
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By Leika Kihara and Stanley White

TOKYO (Reuters) - Japan's central bank held its massive monetary expansion unchanged on Friday, and played down chances of the need for an extra dose next year as it took heart from the U.S. Federal Reserve's decision to begin tapering its own mega-stimulus.

Speaking after a Bank of Japan policy-setting meeting, Governor Haruhiko Kuroda welcomed the Fed's move as a sign that the U.S. economy is recovering steadily, which bodes well for global growth and Japan.

Kuroda also played down the likely impact of a planned increase in Japan's sale tax in April on the economy, saying the country was on course to meet the BOJ's 2 percent inflation target in two years to decisively exit from a long phase of debilitating deflation.

The widening interest rate gap between Japan and the United States, as the BOJ maintains its ultra-easy policy while the Fed winds down its stimulus, is likely to keep the yen weak against the dollar, analysts say.

The dollar hit a fresh five-year high of 104.59 yen on Friday, extending the weak-yen trend that has helped Japan's export-reliant economy emerge from stagnation.

"Frankly speaking, the correction of excessive yen strength has had a positive effect on Japan's economy," Kuroda told a news conference, while stressing that BOJ policy was not directly targeting the exchange rate.

"Corporate earnings have risen and sentiment has improved."

Japan's economy outpaced its G7 counterparts in the first half of this year as Prime Minister Shinzo Abe's stimulus policies boosted business and household sentiment.   Continued...

Photographers take pictures of Bank of Japan Governor Haruhiko Kuroda holding his documents during a news conference at the BOJ headquarters in Tokyo December 20, 2013. REUTERS/Yuya Shino