BOJ Stands Pat on Policy, Sticks to Upbeat View

        TOKYO--The Bank of Japan decided Wednesday to maintain its large-scale easing policy and stick to its upbeat assessment of the economy despite dismal growth figures released earlier this week that prompted Prime Minister Shinzo Abe to delay a tax increase and call early elections.
        While government data released Monday showed the world's third-biggest economy unexpectedly fell into a recession, the BOJ maintained the view that a moderate recovery trend has taken hold, suggesting that the downturn sparked by a tax increase earlier in the year will be short-lived.
        "The Japanese economy has continued to recover moderately as a trend, although some weakness particularly on the production side has been observed," the central bank said in a statement.
        The central bank raised its view on exports, saying that "exports have been more or less flat."
        The relatively optimistic view contrasts with the judgment by Mr. Abe that the economy isn't strong enough to go ahead with a second increase in the sales tax planned for next year. The prime minister said Tuesday that the rise in the tax rate would be delayed by 18 months and that he would seek a popular mandate for the postponement and his economic policy platform known as Abenomics in an election next month.
        Mr. Abe's decision followed the release of data showing an unexpected 1.6% annualized drop in the nation's gross domestic product in the third quarter, figures that made clear the heavier-than-expected blow to the economy caused by the April sales tax increase.
        Still, the bank's latest economic assessment reflects the board's view that the hangover is already waning. Private economists also expect the economy to bounce back, with Barclays forecasting annualized growth of 3.7% in the current October to December quarter.
        The BOJ decided by a majority of eight-to-one to continue pumping cash into the banking system at an annual pace of Y80 trillion ($685 billion).
        Three of the four board members who dissented when the majority decision to expand the bank's easing program was made last month, backed the main policy at the latest meeting, though this likely reflected protocol to support previous decisions rather than a change in their views.
        But the other dissenter last month, Takahide Kiuchi, voted against the main policy decision. He said the monetary policy in place before the ramped up easing introduced at the Oct. 31 meeting was "appropriate." Mr. Kiuchi again proposed that the bank's 2% inflation target be achieved in the medium to long term and that the current easing program be designated as an intensive measure with a time frame of about two years. His proposal was voted down by eight-to-one.
        Last month's extra action was seen as helping the government go ahead with a planned second tax increase next year as part of its measures to tackle fiscal reform. But following the disappointing GDP data, Mr. Abe on Tuesday decided to put off the increase in the sales tax to 10% and hold a snap election next month.
        Market participants will now focus on Mr. Kuroda's news conference later in the day to see how he will assess the negative growth figures as well as the postponement of the tax increase.
        Subscribe to WSJ: http://online.wsj.com?mod=djnwires
        (END) Dow Jones Newswires

        November 18, 2014 23:00 ET (04:00 GMT)

#Kuroda
#BOJ
#Yen
#JPY