BOJ Trims Growth Forecast as Exports Weaken, Kuroda Still Optimistic

Defying market scepticism over its rosy outlook, the central bank roughly maintained its forecasts that see inflation reaching its target in the fiscal year beginning in April 2016.

Published: 15th July 2015 01:03 PM  |   Last Updated: 15th July 2015 01:04 PM   |  A+A-

cargo-truck-japan-reuters

People work near cargo containers loaded from trucks at a port in Tokyo, June 17, 2015. | Reuters

TOKYO: The Bank of Japan trimmed its economic growth forecast on Wednesday but held off on offering fresh stimulus, convinced that an expected pick up in consumption will help accelerate inflation toward its 2 percent target.

Defying market scepticism over its rosy outlook, the central bank roughly maintained its forecasts that see inflation reaching its target in the fiscal year beginning in April 2016.

BOJ Governor Haruhiko Kuroda reiterated his optimism on the global outlook, pointing to data showing China's economy grew a better-than-expected 7 percent in the second quarter.

"Export and output growth have moderated somewhat, but we expect this to be temporary," he told reporters after the two-day rate review.

"But as for the outlook, exports are expected to increase moderately, albeit with some fluctuations, due to improvements in overseas economies and the boost from a weak yen."

As widely expected, the BOJ kept intact its pledge of expanding base money at an annual pace of 80 trillion yen ($648 billion) via aggressive asset purchases.

Japanese policymakers, who had braced for market turbulence from Greece's debt crisis and China's stock market rout, were relieved when Beijing's rapid-fire support steps restored a measure of calm to its markets and Athens clinched a last-minute conditional bailout.

But nodding to signs of weakness in external demand, the BOJ offered a slightly gloomier view on exports and output to say they have been "picking up albeit with some fluctuations."

Last month, it said exports and output were picking up.

A quarterly review of its long-term forecasts underscored uncertainties surrounding the BOJ's projections with the economy likely to have stalled in April-June on weak exports.

The BOJ cut its growth projection for the current fiscal year to March 2016 by 0.3 percentage point to 1.7 percent.

The board also cut by 0.1 point to 0.7 percent this fiscal year's consumer inflation forecast. The estimate for fiscal 2016 was trimmed by the same margin to 1.9 percent, and that for fiscal 2017 to 1.8 percent from 1.9 percent.

"The BOJ will likely have to downgrade these inflation forecasts again," said Hidenobu Tokuda, senior economist at Mizuho Research Institute.

"Since Kuroda is sticking by his 2 percent inflation target, this would imply more monetary easing at some point."

 

EXTERNAL OUTLOOK UNCERTAIN

Japan's economy likely entered a soft patch on weak exports and household spending, though analysts expect growth to pick up in July-September as rising wages lift consumption.

While the BOJ expects robust U.S. demand to prop up growth in Japan's Asian export markets, pessimists in the board fret that shipments may remain soft for longer than expected given China's economic woes and lacklustre global growth.

At Thursday's press conference, Kuroda expressed guarded optimism on China.

"Authorities are taking various monetary and fiscal measures to support growth. The country's growth pace will likely gradually moderate but the economy will sustain stable growth," he said.

The International Monetary Fund trimmed its global growth forecast to take into account the impact of recent weakness in the United States.

The BOJ is confident a solid economic recovery will help accelerate inflation to 2 percent by around September next year. Many analysts doubt price growth will accelerate so quickly and some predict additional stimulus to come later this year.

($1 = 123.4600 yen)

Stay up to date on all the latest Business news with The New Indian Express App. Download now
(Get the news that matters from New Indian Express on WhatsApp. Click this link and hit 'Click to Subscribe'. Follow the instructions after that.)

Comments

Disclaimer : We respect your thoughts and views! But we need to be judicious while moderating your comments. All the comments will be moderated by the newindianexpress.com editorial. Abstain from posting comments that are obscene, defamatory or inflammatory, and do not indulge in personal attacks. Try to avoid outside hyperlinks inside the comment. Help us delete comments that do not follow these guidelines.

The views expressed in comments published on newindianexpress.com are those of the comment writers alone. They do not represent the views or opinions of newindianexpress.com or its staff, nor do they represent the views or opinions of The New Indian Express Group, or any entity of, or affiliated with, The New Indian Express Group. newindianexpress.com reserves the right to take any or all comments down at any time.

flipboard facebook twitter whatsapp