Members of the Bank of Japan's monetary policy board believe that the country's moderate economic recovery will continue at its current pace, the minutes from the board's March 16 and 17 meeting revealed on Monday.
In its long-standing war with deflation, the board said inflation expectations appear to be rising - although the members cautioned that the upside was being capped by tumbling energy prices.
"Japan's economy is expected to continue its moderate recovery trend. 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," the minutes said.
As downside risks to the economy, the board counted debt woes and deflation in Europe, as well as struggles from commodity exporters, and the pace of the U.S. economic recovery.
At the meeting, the central bank kept its massive stimulus unchanged as an 8-1 majority vote maintained the size of quantitative and qualitative easing at an annual pace of about 80 trillion yen. Also, the nation's benchmark interest rate was kept steady at 0.10 percent.
"Japan's economy has continued its moderate recovery trend. Overseas economies - mainly advanced economies - have been recovering, albeit with a lackluster performance still seen in part," the minutes said.
The bank's view on exports, business fixed investment, private consumption, industrial production, public investment and housing investment were all kept unchanged.
The central bank lowered its inflation estimate, with the annual core consumer inflation, excluding the direct effects of the consumption tax hike, now seen at 0 to 0.5 percent compared to 0.5 percent at the February 17th meeting. Inflation expectations were termed as rising from a longer term perspective.
It estimates the annual increase in the consumer price index to be about zero percent for the time being due to falling energy prices. This is a change from its earlier view of a slow increase in annual inflation.
"Quantitative and qualitative monetary easing has been exerting its intended effects and the Bank will continue with QQE, aiming to achieve the price stability target of 2 percent as long as it is necessary for maintaining that target in a stable manner," the minutes said.
Also on Monday, the BoJ said:
• The central bank's index measuring producer prices was up 0.3 percent on month in March, standing at 103.5.
That beat forecasts for a decline of 0.1 percent - which would have been unchanged from the February reading following a downward revision from no change.
On a yearly basis, prices added 0.7 percent - beating forecasts for a gain of 0.4 percent following the downwardly revised 0.4 percent increase in the previous month (originally 0.5 percent).
Export prices added 0.1 percent on month and shed 4.8 percent on year, the data showed, while import prices gained 1.0 percent on month but plummeted 17.1 percent on year.
• The M2 money stock in Japan was up 3.6 percent on year in March, coming in at 894.7 trillion yen. That was in line with expectations and up from the 3.5 percent jump in February.
The M3 money stock added an annual 3.0 percent to 1,209.6 trillion yen. That also was in line forecasts and up from the 2.9 percent gain in the previous month.
The L money stock advanced 3.3 percent on year to 1,590.6 trillion yen after gaining 3.4 percent a month earlier.
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