Members of the Bank of Japan's monetary policy board believe that the country's economic recovery remains on a moderate recovery path, minutes from the board's December 19 and 20 meeting revealed on Friday.
Inflation expectations continue to be in a weakening phase, hampering the central bank's stated goal of ending deflation.
"The year-on-year rate of change in the CPI is likely to be slightly negative or about 0 percent for the time being, due to the effects of the decline in energy prices, and as the output gap improves and medium-to long-term inflation expectations rise, it is expected to increase toward 2 percent," the minutes said.
Downside risks to the economy include a softening of the Chinese economy, the European debt problem and the UK Brexit.
At the meeting, the BoJ kept its monetary stimulus unchanged as expected and raised its assessment of the economy.
"Domestic demand is likely to follow an uptrend, with a virtuous cycle from income to spending being maintained in both the corporate and household sector," the minutes said.
The board voted to maintain the central bank's target of raising the amount of outstanding Japan government bond holdings at an annual pace of about JPY 80 trillion.
The BoJ board also decided to maintain the -0.1 percent interest rate on current accounts that financial institutions maintain at the bank.
"The bank will make policy adjustments as appropriate, taking account of developments in economic activity and prices as well as financial conditions, with a view to maintaining the momentum toward achieving the price stability target," the minutes said.
by RTT Staff Writer
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