Construction workers labour at a construction site in Tokyo
Tokyo - AFP
The Bank of Japan on Wednesday held off launching fresh stimulus, even as weak growth figures earlier this week aggravate concerns about the strength of a recovery in the world's number three economy.
Policymakers said Japan was seeing a "moderate recovery trend", after wrapping up a two-day meeting, but they further cut back on their inflation expectations, in a sign that the BoJ's price targets look increasingly out of reach.
The central bank's decision to keep its already massive stimulus unchanged was widely expected, but analysts have said that weak growth figures may force the BoJ's hand on further easing later this year.
On Monday, official data showed that Japan's economy limped out of recession in the last quarter of 2014, with a weaker-than-expected 0.6 percent expansion between October and December -- or 2.2 percent on an annualised basis.
That followed two consecutive quarters of contraction that came as an April sales tax rise hammered consumer spending.
But economists had expected a stronger 0.9 percent expansion on-quarter, and over the full year the preliminary data showed zero growth, compared with 1.6 percent in 2013.
"As was widely expected, the Bank of Japan left policy settings unchanged at today's meeting," said Marcel Thieliant from Capital Economics.
"Board members upgraded their assessment of industrial production and exports, which they now see picking up. But they also acknowledged the disappointing Q4 GDP data released on Monday by noting that the recovery in private consumption has been sluggish in some areas."
He added: "The BoJ does not seem to be fully convinced over the strength of the economic recovery, and we still think that policymakers will announce more stimulus in late-April."
Markets were now looking to BoJ governor Haruhiko Kuroda's regular post-meeting press briefing later in the day.
- Inflation target -
Last month, the bank slashed its inflation outlook as plunging oil prices dent efforts to slay years of deflation, although policymakers still boosted their growth forecasts and said the economy was rebounding.
On Wednesday, the BoJ's post-meeting statement said inflation, excluding the effects of the tax hike, was hovering around 0.5 percent, down from an earlier range of 0.5-1.0 percent that the bank used last month.
The price downgrades underscore how reaching the BoJ's 2.0 percent inflation target by early next year looks unlikely, and it may ramp up expectations for another round of monetary easing.
The BoJ's inflation target is a cornerstone of Tokyo's wider bid to turn around years of tepid growth by generating price rises and prompting firms to boost their hiring and expansion plans.
But the sales tax hike -- aimed at bringing down Japan's massive national debt -- slammed the brakes on consumer spending, briefly plunging the economy into recession and throwing the success of Tokyo's growth blitz into question.
The BoJ surprised markets in October when it announced an expansion of its huge asset-buying programme -- similar to the Fed's now wound-up quantitative easing plan.
The scheme is aimed at trying to pump cash into the banking system at a current annual pace of about 80 trillion yen ($679 billion) and, in turn, stimulate the economy.