Bank of Japan governor Haruhiko Kuroda answers questions during a press conference following the conclusion of the two-day policy board meeting at the BoJ headquarters in Tokyo. The central bank held fire on expanding its monetary easing programme even as the world’s third-largest economy slipped into its second recession in two years and monthly exports fell.

Reuters
Tokyo

The Bank of Japan kept its monetary stimulus programme unchanged yesterday, with governor Haruhiko Kuroda holding fast to his view that the corporate capital expenditure vital to economic growth will pick up – suggesting that no new monetary easing is imminent.
The BoJ offered a slightly more cautious view on inflation expectations – or how the public perceives future price moves – than at last month’s meeting, underscoring its concerns over a lack of success in nudging companies into boosting wages and investment.
“The BoJ places a lot of importance on inflation expectations, so they would have to consider more easing if inflation expectations weaken further,” said Norio Miyagawa, a senior economist at Mizuho Securities.
Kuroda stressed that there was no change to his commitment of trying to achieve his 2% inflation target at the earliest date possible, a sign he won’t hesitate to ease policy should economic conditions threaten achieving the target.
He shrugged off the view held by many investors that the BoJ won’t able to sustain its stimulus programme, dubbed “quantitative and qualitative easing” (QQE), for too long as its huge government bond purchases are already drying up liquidity.
“There was never a specific timing set in advance on how long QQE will last,” Kuroda told a post-meeting news conference. “I don’t think we will face any problem continuing this programme.”  As widely expected, the BoJ reiterated its pledge to increase base money, or cash and deposits at the central bank, at an annual pace of ¥80tn ($650bn) through purchases of government bonds and risky assets.
It also kept intact its assessment that Japan’s economy continues to recover moderately.
Japan’s economy relapsed into recession in July-September, while exports showed initial signs of bottoming out in October as strong US-bound shipments offset some of the pain from China’s slowdown.  Kuroda shrugged off the July-September contraction as due largely to declines in inventory, saying that consumption remained resilient and exports will rebound over time.
While acknowledging that there were some delays in capital expenditure, he expressed confidence that companies will start deploying some of their record profits on investment and wage increases.  “There are risks such as slowdowns in China and other emerging economies ... Still, capital expenditure will increase, albeit with some delays,” he said.
Kuroda has been urging firms to do more to tackle deflation, a tacit admission that his massive money-printing exercise has failed so far and that policymakers are losing faith in the value of delivering yet more of the same.
At the previous rate review, the BoJ held off on easing despite cutting its growth forecasts and delaying the timing for hitting its 2% price growth goal by six months.  Nearly half of the analysts polled by Reuters expect the BoJ to ease in January, when continued declines in oil costs may force it to cut its quarterly inflation forecasts yet again.
Sources familiar with its thinking say the BoJ will consider easing only if weakness in overseas demand persists long enough to dent business confidence, which would in turn hit investment plans and further discourage wage rises.