The Bank of Japan (BOJ) maintained its ultra accommodative monetary policy stance and view of the economy as continuing its "moderate recovery," but downgraded its view about inflation, saying it was likely to be around zero for the time being due to the decline in energy prices.
But otherwise the BOJ today repeated word-for-word its statement from Feb. 18.
Japan's headline inflation was steady at 2.4 percent in January, unchanged from November and December, while core inflation declined to 2.2 percent.
In April 2013 the BOJ embarked on an aggressive program of quantitative and qualitative monetary easing (QQE) to rid the country of some 15 years of deflation and boost consumer price inflation to 2.0 percent as soon as possible.
But the government's hike in sales tax in April 2014 pushed the country into recession and last October the BOJ raised its target for boosting the country's monetary base by 10-20 trillion yen to about 80 trillion yen to stimulate the economy.
But the fall in oil prices since June 2014 has slowed down inflation and the BOJ today acknowledged this impact, saying "the year-on-year rate of increase in the CPI is likely to be about 0 percent for the time being, due to the effects of the decline in energy prices."
This compares with its Feb. 18 statement when it said: The year-on-year rate of increase in the CPI is likely to slow for the time being, reflecting the decline in energy prices."
On March 9 BOJ Deputy Governor Hiroshi Nakaso said the central bank was not ready to embark on additional monetary easing because oil prices were likely to rebound and the annual inflation rate was expected to reach around 2 percent in an around fiscal 2015, which begins April 1.
Japan's Gross Domestic Product rose by 0.4 percent in the fourth quarter from the third quarter, pulling out of a recession in the third and second quarters that followed the government's increase in sales taxes to 8.0 percent from 5.0 percent on April 1.
On an annual basis, fourth quarter GDP was still down 0.8 percent, slightly better than the 1.4 percent contraction in the third quarter but worse than the 0.3 percent drop in the second quarter.