The Bank of Japan is likely to keep intact its ultra-easy monetary policy at its two-day policy meeting starting Thursday, with focus on production and consumer spending amid the slowing Chinese economy, sources said Monday.
Despite Japan’s low inflation rate, which was 0.1 percent in June due largely to declining energy prices, the central bank believes the underlying trend of inflation remains in place due to ongoing price hikes in food products, the sources said.
To beat nearly two decades of deflation, the BOJ is aiming to achieve its 2 percent inflation target in the first half of fiscal 2016.
The country’s industrial output rose a seasonally adjusted 0.8 percent in June from the previous month after a 2.1 percent drop in May, but the rebound appears to be weak amid sluggish exports and consumer spending at home.
The BOJ thinks Japan’s lackluster private spending was affected by unstable weather and is likely to maintain the view that the economy is recovering moderately as production and consumption are expected to return to a recovery path from this summer.
As for the Chinese economy, which is suffering from plunges in share prices, the BOJ currently believes the world’s second-largest economy is expected to pick up with the government’s stimulus measures.
Meanwhile, the BOJ also plans to release next year’s schedule of its policy meetings after it decided in June to reduce the number of the gatherings to eight annually from the current 14.
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