The Bank of Japan kicked off a two-day policy meeting Monday where it may consider revising down its assessment of overseas economies amid a Chinese slowdown.
The meeting came as the BOJ faces increasing market pressure for further monetary easing, with domestic inflation remaining weak due to declining crude oil prices.
The deceleration in the world’s second-largest economy is basically in line with BOJ expectations. It believes the Chinese government will implement stimulus measures to keep the economy afloat.
But the nine-member Policy Board may consider adopting a more cautious view on overseas economies, as negative effects of the slumping Chinese economy may spread to other Asian nations, hurting Japan’s production and exports.
“Overseas economies — mainly advanced economies — have been recovering albeit with a lackluster performance still seen in part,” the BOJ said last month.
The discussion is also likely to cover developments in crude oil prices after consumer prices became flat in July from a year earlier after rising 25 straight months. The development could jeopardize the BOJ’s attempt to achieve its 2 percent inflation target in the first half of fiscal 2016.
The central bank maintains the view that prices will rise once oil prices stabilize, though the crude oil market is seeing an outflow of funds due to prospects of an interest rate hike in the United States.
BOJ Gov. Haruhiko Kuroda told a Diet committee last week that the timing of attaining the inflation target may be delayed due to declining crude oil prices.
Lower crude oil prices “will have negative impact on prices,” Kuroda said, while also adding that the trend of rising prices was “steadily picking up.”