(MENAFN- Gulf Times) Bank of Japan officials view any weakness in economic growth and inflation in the second quarter as temporary and remain confident the longer-term trend is intact.
There is no need for the BoJ to change its outlook on this trend when the policy board meets July 14-15, according to people familiar with discussions inside the central bank.
Officials are looking beyond recent disappointing data for production and exports and see a tight labour market and wage gains as signs of improvement, said the people, who asked not to be named because talks are private. This view reduces the likelihood of an increase in monetary stimulus anytime soon, despite a warning from BNP Paribas SA that the economy may have contracted in the second quarter and JPMorgan Chase & Co's projection that growth stalled.
"It's hard to imagine additional easing now as the recovery continues," said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management Co in Tokyo. "The BoJ is likely to see no change in upside and downside risks." BoJ officials expect Japanese factory output and exports to pick up, given demand in the US, the people said.
Policymakers are also carefully watching developments in Greece and China, according to people with knowledge of the matter. China could pose a bigger risk than Greece because of its closer economic ties with Japan, they said.The BoJ forecast in April that its ultimate goal for 2% inflation would be met sometime around the six months through September 2016. Governor Haruhiko Kuroda said last month the trend for inflation was improving with the tight labour market and rising wages.
The median forecast of BoJ policymakers in April was for the economy to expand 2% this fiscal year, with the projections ranging from 0.8% to 2.2%. The median expectation for inflation was 0.8%, with estimates from 0.2% to 1.3%.
There is room for adjustment in these figures within the context of confidence in the trend for growth and prices, according to some of the people. Japanese second-quarter gross domestic product is scheduled for release on August 17.
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