Japan’s central bank on Thursday said the world’s third-largest economy would grow slightly less than expected amid turmoil overseas, but it held off fresh easing as it pointed to a steady recovery.
The move surprised some analysts after a flurry of policy moves by central banks in Europe, Asia and South America aimed at propping up a global economy that is showing signs of slowing.
But the BoJ, following a two-day policy meeting, said it would keep rates steady at zero to 0.1 per cent and a 70 trillion yen (Dh3.2 trillion) asset-purchase programme in place.
The bank also said it expected Japan’s economy to expand by 2.2 per cent in the fiscal year ending March 2013, slightly lower than its April outlook of 2.3 per cent growth.
But the latest forecast was still higher than its January outlook of 2.0 per cent growth. Japan’s economy contracted in 2011 as it was pounded by the quake-tsunami disaster, a strong yen and flooding in Thailand.
The bank also kept a 1.7 per cent growth forecast for the next fiscal year unchanged.
It cited improving domestic demand and business confidence but acknowledged that uncertainty in overseas markets, including Europe and the United States, could be a drag on Japan’s economic recovery.
“Japan’s economic activity has started picking up moderately as domestic demand remains firm mainly supported by reconstruction-related demand” following last year’s natural disasters, it said in a statement.
“[But] there remains a high degree of uncertainty about the global economy, including the prospects for the European debt problem...[and] the momentum toward a recovery for the US economy”.
The US Federal Reserve has also held off fresh measures, but the European Central Bank and China’s central bank ushered in rate cuts last week, while Brazil on Wednesday cut its rate to a record low.