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Kuroda: tax hike doesn't threaten the economy

The Bank of Japan policy meeting brought no surprises to the markets as the expansion of the monetary base was left unchanged at 60-70 trillion yen. Following the policy announcement, the  BOJ Governor Haruhiko Kuroda said that Japan's economy continued exceeding its potential growth rate and that the effect from the sales tax hike remains within expectations.

"The downturn in spending after the sales tax hike is roughly within expectations. Domestic demand, including capital expenditure, remains firm as a trend. A virtuous cycle in economic activity clearly remains in place," the governor assured. As for the inflation, BoJ still believes it will be able to reach its 2% price stability target at some stage in late 2015 or early 2016.

Quantitative easing, which is appraised as an effective measure, wouldn't be withdrawn until the 2% inflation target was reached, Kuroda stressed, adding that other adjustments would be made if needed. "If the Fed steadily heads towards increasing rates and the BoJ keeps QE in place, the JPY shouldn't rise against the USD", he said.

Danske Bank: “In the coming months it will be status quo from BoJ and we are unlikely to see any easing measures unless the JPY for some reason appreciates markedly. Hence, there is unlikely to be any impetus for a weaker JPY from Japan’s monetary policy in the short run”.



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