The Bank of Japan on Thursday upgraded its opinion of the economy for the seventh consecutive month and said it is “starting to recover moderately” on improving corporate sentiment and solid consumer spending.
It was the first time the BOJ has used the word “recovery” in its assessment in 2½ years. The last time was in January 2011, two months before the Great East Japan Earthquake.
BOJ Gov. Haruhiko Kuroda said the central bank came to its conclusion from various economic indicators and noted “a positive cyclical mechanism has been gradually working.”
At a two-day policy meeting through Thursday, the BOJ retained its target of achieving around 2 percent inflation within two years to halt nearly two decades of deflation by pumping record amounts of cash into the economy.
“The BOJ has taken enough policy measures for achieving the target in about two years,” Kuroda said.
After the meeting, the nine-member Policy Board unanimously agreed to maintain the radical monetary easing policy it launched in April. The goal of the program is to double the nation’s monetary base by boosting purchases of a wide range of government bonds and risky assets.
In an interim review of the BOJ’s semiannual outlook issued in late April, Japan’s projected economic growth for the year ending next March was revised downward from 2.9 percent to 2.8 percent.
As for the outlook on prices, the BOJ stuck to its view that the consumer price index will post a year-on-year rise of 1.9 percent in fiscal 2015.
The bank’s median forecast for the CPI, excluding fresh food, came to a 0.6 percent uptick this year and 1.3 percent in fiscal 2014, respectively down from the 0.7 percent and 1.4 percent growths projected in April. The fiscal 2014 and 2015 forecasts, however, exclude the effects of the two planned sales tax hikes.
The economic forecast for fiscal 2014 was trimmed to 1.3 percent and that of 2015 to 1.5 percent, compared with 1.4 percent and 1.6 percent, respectively, projected in April.
Overall, the country’s growth rate and CPI change “will likely be broadly in line” with the April forecasts, the central bank said.
The upgrade came after the bank’s quarterly “tankan” sentiment survey showed that business confidence among large manufacturers re-entered positive territory in June for the first time in seven quarters, boosted by a recovery in exports driven by the weakening yen and improving U.S. economy.
Sales at department stores are also on the rise, with rising stock prices stirring hopes of an economic recovery.
In its statement Thursday, the BOJ said exports have been “picking up” while capital investment “has stopped weakening and shown some signs of picking up as corporate profits have improved.”