Bank of Japan strikes less optimistic tone on economy

[TOKYO] The Bank of Japan on Tuesday struck a less optimistic tone on its view of the world's number three economy, but held off launching fresh monetary easing measures after a two-day meeting.

The central bank, which has been upbeat on Japan's prospects, flagged housing and industrial production as weak spots in a statement outlining its unanimous decision.

It added that an uptick in business sentiment has "paused" on the back of an April sales tax hike that led to a sharp contraction in second-quarter gross domestic product.

"Japan's economy has continued to recover moderately as a trend," the BoJ statement said, but it noted "some weakness, particularly on the production side" as demand dived after the introduction of April's sales tax hike.

The BoJ said it was still on track to hit a 2 per cent inflation target, seen as key to reversing years of falling prices and tepid growth.

Investors will now turn their focus to governor Haruhiko Kuroda's post-meeting comments as speculation increases that the BoJ will be forced to act as the economy continues to struggle.

Despite its generally positive take on the economy, the BoJ has lowered its growth forecast for the current fiscal year to March to 1 per cent, well down from a 1.5 per cent prediction in late 2013. - AFP