The Bank of Japan says it will maintain its massive asset buying programme at existing levels. But, as David Pollard reports. it's offered a bleaker view of the economy and suggested it may roll out more stimulus as it struggles to reach an elusive inflation target.
The Bank of Japan in damage limitation mode. Its massive asset-buying programme - that kept at current levels for now. But its new negative interest rate policy - there were signs of edging back on that. BoJ policymakers notably omitting a pledge to cut rates even more deeply if necessary, from their statement. (SOUNDBITE) (Japanese) BANK OF JAPAN GOVERNOR, HARUHIKO KURODA, SAYING: "We will come up with the most appropriate combination of quantity, quality and interest rates if we think we need to take action ... But we don't have any pre-set steps in mind." The Bank bet negative rates would boost share prices and weaken the yen when introduced in January. In fact - just the opposite's happened. With the policy backfiring, the Bank's also beset by public confusion over the new rates - and by complaints over their possible damage to the financial sector. (SOUNDBITE) (English) CHIEF ECONOMIC ADVISER, CEBR, VICKY PRYCE, SAYING: "The problem of course is that businesses ... read it as a sort of panic measure, because obviously economic forecasts have been downgraded, exports are not doing particularly well because of the slowdown all around the region and therefore they themselves are looking at whether they should be investing or not." A softer BoJ outlook has some economists talking of the risk of recession - and the possibility of more easing to come, if in less dramatic steps. Governor Kuroda admitted that inflation is weakening - but strong domestic demand should boost the recovery, he says. Though with an entrenched Japanese savings culture locking up trillions of yen - that's still proving an elusive goal.