Bank of Japan governor Haruhiko Kuroda says there is ''no reason'' to withdraw the bank's massive monetary stimulus since inflation remains far from its 2 percent target. David Pollard reports.
Inflation picking up - manufacturers at their most confident in three years .... The latest data hints at a recovery in Japan. There is though no hint yet of a change in policy from the Bank of Japan. (SOUNDBITE) (Japanese) BANK OF JAPAN GOVERNOR, HARUHIKO KURODA, SAYING: "Risks to both economic activity and prices are skewed to the downside, and developments in inflation expectations warrant particular attention .... Taking those elements into account, there's no reason to reduce monetary accommodation at the moment." Core CPI was 0.2 per cent last month - the highest rate in nearly two years. A one per cent rate seen later this year, according to a Reuters poll. The BoJ sees a targetted two per cent next. (SOUNDBITE) (English) NICK PARSONS, GLOBAL HEAD FX STRATEGY, NAB, SAYING: "Yes, we can see CPI picking up - but that after all is what policy is supposed to do. So to abandon the policy at the first signs of life in the indicators of prices, would I think be a little bit premature." Fed tightening also means rising US bond yields - and more downward pressure on the yen. Japan seeing its exports at their strongest in two years last month - on a still weak currency. (SOUNDBITE) (English) NICK PARSONS, GLOBAL HEAD FX STRATEGY, NAB, SAYING: "In an environment where government bonds elsewhere are seeing yields rising, it could be that the differential with Japan widens sufficiently to keep the yen on the back foot, and that's probably what they would be hoping to do." Kuroda also played down the risk of Donald Trump-led protectionism. Japan and the US hold economic talks next month - Japan's widening trade surplus may well be on the agenda. In the meantime, factory output data due next week could be the next test. Analysts eager to see whether the optimism in manufacturing is really justified.