BOJ upgrades view on consumption, rules out early exit from stimulus

Fri Jun 16, 2017 8:15am EDT
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By Leika Kihara and Stanley White

TOKYO (Reuters) - The Bank of Japan kept monetary policy steady on Friday and upgraded its assessment of private consumption for the first time in six months, signaling its confidence in an export-driven economic recovery that is gaining momentum.

But Governor Haruhiko Kuroda reassured markets the BOJ will still lag well behind the Federal Reserve in dialing back its massive stimulus program, with inflation far from reaching his 2 percent target.

He also shrugged off the need to scrap the BOJ's pledge to increase its bond holdings at 80 trillion yen ($729 billion) per year, even though recent purchases have slowed significantly.

"There's some distance to achieving 2 percent inflation, so it's inappropriate to say now specifically how we will exit our ultra-loose monetary policy, and how that could affect the BOJ's financial health," Kuroda told a news conference.

"We will debate an exit strategy only after 2 percent inflation is achieved and price growth stays there stably."

As widely expected, the BOJ maintained its pledge to guide short-term interest rates at minus 0.1 percent and the 10-year government bond yield around zero under its yield curve control (YCC) program.

Relishing recent bright signs in the economy, the central bank upgraded its view on private consumption for the first time since December 2016 to say it has shown "increased resilience."

That was a more upbeat view than the previous meeting in April, when it said spending was resilient.   Continued...

People walk past the Bank of Japan building in Tokyo, Japan June 16, 2017.   REUTERS/Toru Hanai