The Bank of Japan on Friday warned over a worsening export and factory output picture but it held fire on launching more stimulus, saying the economy was recovering from a recent sales tax hike. The decision was widely expected so markets focused on BoJ governor Haruhiko Kuroda's post-meeting comments, amid growing speculation that the slowing economy would force the BoJ's hand on more monetary easing.
However, Japan's top central banker gave little indication he would soon pull the trigger on more measures - similar to the Federal Reserve's quantitative easing - after the levy hike dented consumer spending and growth in the world's number three economy. Kuroda, however, has said the impact of the sales tax hike has not been as bad as expected, and its effects were waning, as the bank pushes to hit a 2.0 percent inflation target by next year.
The bank chief has pledged to take further action if necessary, after last year launching unprecedented measures as part of a wider move to kickstart the deflation-plagued economy. On Friday, Kuroda and his colleagues acknowledged potential headwinds, saying that exports were declining, after Japan's trade deficit more than quadrupled in June from a year ago, while factory output was "showing some weakness". Kuroda also said that the sharp decline in the yen over the past year and a half had not boosted exports "as much as we had expected". However, the bank offered a mixed picture, saying that jobs and wage growth were improving, with demand picking up after initially dropping in the wake of the tax hike.
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