News » Money
Apr 8, 3:00 AM EDT

Japan central bank upbeat, keeps ultra-loose monetary intact after sales tax

AP Photo
AP Photo/Eugene Hoshiko
Business Video

Latest Business News
Providence, RI, sues financial firms, says they defrauded investors with high-speed trading

Bankruptcy judge rules against American Airlines' bid to quickly end retiree benefits

Figures on government spending and debt

Correction: Restaurant Sales story

Recalls this week includes lanterns, exercise devices, gun storage boxes, shoes

Latest News
Toyota recalls 1.8M vehicles in the US _ and nearly 6.4M globally _ for various defects

Japan central bank upbeat, keeps ultra-loose monetary intact after sales tax

A district summary of the Beige Book
Measuring economic stress by county nationwide
Mall malaise: shoppers browse, but don't buy
Unemployment by the numbers
Family struggles with father's unemployment
Saying an affordable goodbye
Hard times hit small car dealer
Latest Economic News
US stocks edge mostly higher amid wave of earnings; GE and Morgan Stanley rise

How the Dow Jones industrial average and other major stock indexes fared Thursday

Travelzoo, Morgan Stanley, Mattel, Barnes & Noble and IBM are big market movers

US stocks edge mostly higher amid wave of earnings; GE and Morgan Stanley rise

Technology stocks lead an early decline in Wall Street after Google, IBM earnings disappoint

China's cheap factories face new challenge as economic growth inexorably slows

French premier vows to cut $29 billion in pensions, health and social care by 2017

Russian economic slows sharply amid Ukraine tensions, but Putin seen undeterred

UK unemployment falls below 7 percent as earnings growth outstrips inflation

China's economic growth slows to 7.4 percent, raising risk of job losses, impact on trade

Buy AP Photo Reprints
Greece's Debt Threatens to Spread
State budget
gaps map
Auto industry problems trickle down, punish Tennessee county
Women give old Derby hats a makeover in tough economy
S.C. town deals with highest unemployment in South
How mortgages were bundled and sold as securities
Tracking the $700 billion financial bailout
Tracking the year's job losses
State-by-state foreclosures since 2007
Credit crisis explained
Presidents and their economic legacies
Lexicon of the financial crisis
Americans' addiction to debt

TOKYO (AP) -- Japan's central bank has refrained from expanding its ultra-loose monetary policy despite a sales tax hike, saying the economy is recovering moderately.

The Bank of Japan's policy statement Tuesday was the first since an April 1 increase in the sales tax, to 8 percent from 5 percent, that is expected to stall economic growth in coming months as consumers adjust to higher costs.

The BOJ said inflation is likely to remain at about 1.25 percent for some time, below its target of 2 percent.

"Business sentiment has continued to improve, although some cautiousness about the outlook has been observed," it said. There has been an uptick in corporate investment, the bank said.

Japanese policymakers are counting on expectations of higher prices in the future to drive consumer spending and eventually prompt companies to invest more and create more jobs. The central bank's assessment of current economic trends is calibrated to support that approach.

The bank's decision to stand pat was expected.

"While the economy will surely contract in the second quarter, this needs to be seen in light of a likely surge in output in the first quarter and a likely rebound in the third quarter," Capital Economics said in a commentary Tuesday. "What's more, there is already substantial monetary easing in the pipeline until year-end."

Strong public investment and a housing boom have helped support growth since BOJ Gov. Haruhiko Kuroda announced, a year ago, unprecedentedly huge asset purchases to spur inflation and help Japan's economy recover from two decades of doldrums.

Kuroda has said the policies will remain for as long as needed.

Meanwhile, Japan's current account returned to surplus in February for the first time in five months, the Finance Ministry reported.

It said higher income from overseas securities investments, due to the weaker yen, offset the trade deficit, although the surplus in the current account, which also includes trade, fell 5.7 percent from a year earlier to 612.7 billion yen ($5.9 billion).

Japan has ramped up imports of oil and gas to compensate for the loss of its nuclear power capacity following the 2011 accident at the Fukushima Dai-Ichi nuclear power plant. A weakening in the yen's value in the past 18 months has inflated the cost of its imports, while exports have not kept pace.

© 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Learn more about our Privacy Policy and Terms of Use.