Bank of Japan monetary policy statement

The Bank of Japan said Thursday that it kept its monetary policy unchanged after its two-day meeting, but it cut inflation forecasts for fiscal years 2017/2018 and 2018/2019.

The central bank was expected to lower its inflation forecast in a continued battle with stubbornly weak price growth even as the wider economy is now on firmer footing, economists said ahead of the release of the central bank’s monetary policy statement.

The BOJ, which ends its two-day meeting on Thursday, was also expected to keep rates unchanged and hold off from expanding stimulus despite the more upbeat economic outlook, said economists.

Japan’s Ministry of Finance data showed on Thursday that the country’s exports grew 9.7 percent year-on-year in June — beating the 9.5 percent gain forecast by Reuters.

But inflation remains the central bank’s Achilles heel. UOB senior economist Alvin Liew said the BOJ will likely delay the timeline to achieving its 2 percent target by fiscal year 2018 as price growth has remained close to zero.

“That’s the most likely case today, that they will delay the timeline. But then again, the idea of the 2 percent target, whether it is realistic or not … many people think that for the case of Japan, it may not be something that they will see in the near future,” Liew said on CNBC’s “The Rundown.”

Marcel Thieliant from Capital Economics shared the view that inflation in Japan will remain well below the central bank’s 2 percent target over the next few years. He wrote in a note earlier this week that inflation will be “broadly flat at around 0.5 percent next year.”

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“That said, there are still twenty months to go before the end of the next fiscal year so we expect the Bank to only push back the timeframe for hitting the target at its October meeting,” he wrote.

The BOJ has pushed back the timing to reach its inflation goal five times since governor Haruhiko Kuroda unveiled his asset-buying program in 2013, according to Reuters.

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