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BOJ Starts Two-Day Policy Meeting, Focus on Report

The Bank of Japan starts a two-day monetary policy meeting on Monday, with board members seen putting their heads together to prepare for an economic outlook report due later this month.

No policy change is expected at the meeting, as the central bank has said time and again that it will only raise rates gradually after lifting them to 0.5% from 0.25% in February.

Instead, financial markets will be looking ahead to the BOJ's twice-yearly outlook report due out on April 27 to try to decipher what the bank's gradual approach means in terms of the possible timing of its next rate hike.

The meeting will be the first for two new board members: former trading house executive Hidetoshi Kamezaki and former ferry company president Seiji Nakamura.

Although little is known about their stances on monetary policy, most analysts expect the two to vote along with Governor Toshihiko Fukui, at least at first.

In the twice-yearly report, the bank is to unveil the board members' forecasts of Japan's economic growth and core consumer price inflation for the fiscal year that started on April 1 and the following year.

Above all, the bank's projections for consumer prices will be closely watched, as recent softness in prices has stirred speculation that the BOJ's next monetary tightening could be delayed.

The core consumer price index, which excludes volatile fresh food prices, slipped 0.1% in February from a year earlier, the first fall in 10 months, government data showed last week.

Although that was largely due to an easing in oil-related prices since the middle of last year, the data underlined the lack of inflationary pressure in Japan.

Still, analysts think the BOJ will stick to its long-held scenario that prices should rise at some point because the economy has been growing faster than its potential growth rate for so long, leading to tight labor markets and a high level of capacity utilization.