BOJ maintains stimulus, cuts inflation forecast

[TOKYO] The Bank of Japan maintained its massive monetary stimulus on Wednesday and expanded a loan programme aimed at encouraging banks to boost lending, signalling its resolve to achieve its ambitious 2 per cent inflation target.

As widely expected, the BOJ decided to maintain its pledge to increase base money, or cash and deposits at the central bank, at an annual pace of 80 trillion yen (US$676 billion) through purchases of government bonds and risky assets.

The central bank extended the March deadline of two loan programmes, both aimed at nudging banks to lend more instead of sitting on their pile of cash, by one year. It increased the size of one of the programmes by 3 trillion yen, to 10 trillion yen.

In a quarterly review of its long-term forecasts, the BOJ raised its economic growth forecast for the next fiscal year beginning in April. But it cut its core consumer inflation projection to 1.0 per cent from an estimate 1.7 per cent issued three months ago, largely due to a collapse in global oil prices.

BOJ Governor Haruhiko Kuroda will hold a news conference at 3:30 p.m. (0630 GMT) to explain the policy decision.

The BOJ unexpectedly expanded monetary stimulus in October last year as soft domestic demand and slumping oil prices slowed consumer inflation, threatening to delay an end to deflation.

But oil prices have lost nearly half of their value since then, keeping the central bank under pressure to act again to ensure it can meet its pledge to hit the 2 per cent inflation target next fiscal year.

REUTERS