TOKYO (Reuters) - Bank of Japan Governor Haruhiko Kuroda on Wednesday affirmed its upbeat view of the economy, even as global financial markets wobble, stressing that growth will pick up around mid-year as the sting of a sales tax hike fades.
Price rises will broaden as the economy continues gradually to improve, Kuroda added, reiterating his view that Japan is making headway towards the central bank’s price goal of 2 percent inflation in about a year’s time.
“It’s true (the tankan survey published earlier this month) showed a wide range of companies, especially among automakers and retailers, holding a more cautious view about the economic outlook,” Kuroda told a parliamentary session.
“But the level (of confidence) remains high and corporate capital spending plans for fiscal 2014/15 is solid. Companies’ positive stance is maintained,” he said.
Kuroda’s comments came a day after he met Prime Minister Shinzo Abe to discuss the economy, which drew some market speculation the BOJ may come under pressure to expand stimulus as a rebound in the yen and sliding Japanese share prices cloud the outlook for the world’s third-largest economy.
Kuroda attempted to quash this speculation, telling reporters after the meeting that the premier did not ask him to take further measures to end deflation.
BOJ officials have repeatedly expressed confidence that this month’s increase in the national sales tax will not derail the economy or prevent inflation from hitting the central bank’s 2 percent target.
But many economists and traders say the BOJ will have to ease policy again - perhaps in July - as consumer price gains are likely to stall. The BOJ has had trouble bridging this gap in perception about future policy moves.
In contrast to the BOJ’s optimism, the government is set to revise its overall assessment of the economy because of the effect of the tax hike when it publishes a monthly report due soon, the Nikkei business daily reported.
Kuroda stressed that the economy will weaken in April-June due to the tax hike’s impact but will return to growth above its potential, seen as around 0.5 percent, thereafter as job and income conditions improve.
He noted, though, that Japan was only half-way towards meeting the BOJ price target - a view he has recently started to emphasize - possibly to keep alive market expectations that the central bank is ready to act if the economy falters.
“For now, what’s important is to do our best toward meeting our 2 percent price target at the earliest date possible,” Kuroda said.
The BOJ next meets for a policy review on April 30, when it will also release new long-term economic and price projections set to show Japan will produce sustained inflation of around 2 percent for at least two years from mid-2015.
Reporting by Leika Kihara; Editing by Dominic Lau and Eric Meijer