The Bank of Japan trimmed its economic growth forecast on Wednesday but held off on offering fresh stimulus, convinced that an expected pick up in consumption will help accelerate inflation toward its 2 percent target.
Defying market skepticism over its rosy outlook, the central bank roughly maintained its forecasts that see inflation reaching its target in the fiscal year beginning in April 2016. BOJ Governor Haruhiko Kuroda reiterated his optimism on the global outlook, pointing to data showing China's economy grew a better-than-expected 7 percent in the second quarter.
"Export and output growth have moderated somewhat, but we expect this to be temporary," he told reporters after the two-day rate review. "But as for the outlook, exports are expected to increase moderately, albeit with some fluctuations, due to improvements in overseas economies and the boost from a weak yen."
As widely expected, the BOJ kept intact its pledge of expanding base money at an annual pace of 80 trillion yen ($648 billion) via aggressive asset purchases. Japanese policymakers, who had braced for market turbulence from Greece's debt crisis and China's stock market rout, were relieved when Beijing's rapid-fire support steps restored a measure of calm to its markets and Athens clinched a last-minute conditional bailout.
But nodding to signs of weakness in external demand, the BOJ offered a slightly gloomier view on exports and output to say they have been "picking up albeit with some fluctuations."