TOKYO, June 16 (Xinhua) -- The Bank of Japan (BOJ) on Friday decided to keep its monetary policy unchanged in a bid to shore up the economy and continue with its reflationary efforts, although the bank's chief said that improving underlying inflation and expectations would take some time.
"It is taking long to turn around Japan's deflationary mindset because the country has been mired in deflation for a long time," BOJ Governor Haruhiko Kuroda told a news conference Friday.
"People tend to act on the assumption that wages and prices won't rise... But the job market is tightening further, so we will likely see that pushing up sales prices. We expect inflation to gradually accelerate ahead," the central bank's chief said following the conclusion of a two-day policy board meeting.
The central bank's policy board earlier in the day voted 7-2 to maintain its interest rate at minus 0.1 percent as well as maintaining its efforts to keep the yield on 10-year Japanese government bonds at around zero percent.
The BOJ also opted to keep asset purchases around the current target of 80 trillion yen (720.4 billion U.S. dollars).
The central bank raised its economic assessment and increased its real gross domestic product (GDP) growth forecast for the 2017-18 fiscal year to 1.6 percent from the 1.5 percent forecast in January.
"Japan's economy has been turning toward a moderate expansion. Overseas economies have continued to grow at a moderate pace on the whole," the BOJ said in a statement Friday.
The bank, however, lowered its core consumer price index (CPI) growth forecast to 1.4 percent from 1.5 percent in the same period.
"The bank will continue with 'quantitative and qualitative monetary easing, with yield-curve control,' aiming to achieve the price stability target of 2 percent, as long as it is necessary for maintaining the target in a stable manner," the central bank said.
According to the latest statistics, Japan's core consumer price index for April rose 0.3 percent on year to 100.1, marking the fourth straight month of increase, but the rate of increase is still far from the central bank's target of 2 percent annual inflation.
"We're recently seeing some data showing inflation expectations not just bottoming out but heading higher. But we can't say yet that inflation expectations have completely turned positive... At some point, we expect underlying inflation and inflation expectations to heighten. But that will take some time," Kuroda said.
The BOJ's decision to continue its aggressive monetary easing program comes as the U.S. Federal Reserve raised its own key interest rates on Wednesday for the second time this year.
The European Central Bank is also likely to exit from its monetary easing program in the weeks to come, economists maintain.
But the BOJ chief remained noncommittal on the bank's own exit strategy, despite having said recently that the bank had been mulling introducing tapering measures sooner rather than later.
"It's true we shouldn't debate an exit strategy now. But that doesn't mean we shouldn't be aiming to achieve 2 percent inflation... There's no clear link, theoretically and practically, between demographics and deflation," Kuroda said.
"When advanced economies all set their inflation targets at 2 percent, that would contribute to stabilizing exchange rates to some extent," the central banker said, adding, "I know there are various discussions on the pros and cons of prolonged easing. But what's most important is to achieve price stability and maintain it."
"Achieving and maintaining price stability is far more important than how long you continue easy monetary policy," he said.
