Tokyo: The Bank of Japan maintained its massive monetary stimulus on Friday and offered a brighter view of the economy, clinging to hope that joint efforts with Prime Minister Shinzo Abe to revitalise the economy will prod companies into boosting wages and investment.

The rate review was the first since Abe’s landslide victory in a December 14 election that gave him a fresh mandate to continue efforts to pull Japan out of 15 years of grinding deflation.

Having just expanded stimulus seven weeks ago, the BoJ maintained its pledge of increasing base money, or cash and deposits at the bank, at an annual pace of 80 trillion yen (Dh2.5 trillion, $674 billion) through aggressive asset purchases.

BoJ Governor Haruhiko Kuroda stressed that Japan is on track to hit the central bank’s 2 per cent inflation target in the year beginning in April 2015, shrugging off speculation that a dramatic slide in oil costs will weigh on consumer prices and force Kuroda to ease policy again early next year.

“We’re making steady progress in shaking off the public’s deflationary mindset,” Kuroda told a news conference.

“There’s no change to our view that Japan will see inflation hit our price target in a period centring around fiscal 2015.”

Confidence

Unfazed by the recent market turbulence and fragile consumer sentiment, the BoJ offered a brighter view of the economy than last month to say that it continues to recover moderately with the pain from a sales tax hike in April subsiding.

It also revised up its assessment on exports and output in a sign of its confidence that the world’s third-largest economy is on track to rebound from a recession.

A Reuters poll showed many analysts agree with the BoJ’s view, though they also expect the central bank to ease monetary policy again in the second half of next year on expectations consumer inflation will struggle to hit its target.

Slumping global oil prices, while beneficial for the economy, have added to headaches for the BoJ. Core consumer inflation hit 0.9 per cent in the year to October and data due next week is set to show it slowed to 0.7 per cent in November, according to a separate Reuters poll.

The board likely kicked off debate on how recent oil moves may affect the price outlook, ahead of a quarterly review of its long-term forecasts in January.