• Bloomberg


The Bank of Japan’s unprecedented monetary stimulus can drive inflation to its 2 percent target, Gov. Haruhiko Kuroda said as the bank left its policy unchanged and trimmed its price outlook.

A slowdown in Japan’s economy is unlikely to continue this quarter while inflation could pick up “quite fast” from the autumn, Kuroda said after the bank kept a pledge to expand the monetary base at an ¥80 trillion annual pace.

The governor stuck to his view that inflation will reach its target by September next year and, while he ruled out any immediate expansion in easing, reiterated readiness to act if necessary. A majority of economists doubt prices will pick up as the central bank envisions, with a third of those in a Bloomberg survey this month seeing further action in October.

“I don’t think a bit of weakness from April to June will continue from July at all,” Kuroda said at a news conference. “Monetary policy is responsible for lifting inflation to the 2 percent target, and I think that can be done while taking into account various factors.”

Earlier in the day, the central bank said in a statement that it will continue to expand the monetary base at an annual pace of ¥80 trillion. It cut its inflation outlook for the fiscal year through March 2016 to 0.7 percent from 0.8 percent and forecast 1.9 percent for the next fiscal year.

“The BOJ will shrug off the downward revisions in prices and growth by emphasizing improvement in wages and labor market,” said Daiju Aoki, an economist at UBS Group AG. “But it’s just so noticeable from their forecasts that things aren’t going as the BOJ hopes. These revisions are a sign the economic situation is getting tougher.” Weakness in Japan’s exports and production and continued sluggishness in consumer spending after last year’s sales-tax hike are increasing the challenges in reflating the world’s third-biggest economy.

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