Bank of Japan opts against extending stimulus

The Bank of Japan has opted against extending its stimulus measures, even though its inflation target is under threat amid slumping exports and a decline in oil prices.

On Wednesday, Japan’s central bank decided by an 8 to 1 vote to leave the bank's policy target unchanged and reiterated its pledge to increase base money at an annual pace of 80trn yen (£436bn) via asset purchases.

"Japan's economy continues to recover moderately although exports and production have been affected by the slowdown in emerging economies," the BOJ said in a statement, indicating its assessment of the economy remained unchanged from the previous month.

However, analysts believe the BoJ will remain under pressure to implement easing measures at its meeting on 30 October, as fears of recession in Asia’s second largest economy persist.

“The focus is now on the board's decision at its next policy meeting on 30 October, when it will update its medium-term growth and inflation forecasts in its semi-annual Outlook Report,” said analysts at Market News International. “Board members are expected to lower their forecasts for the current fiscal year in light of weak economic data.”

The Nikkei closed higher on Wednesday, as energy stocks were boosted by a rally in oil prices and analysts indicated the BoJ’s decision is unlikely to turn the mood sour in the markets for the time being.

“With investors desperate for the global easy money policy song to play longer - in the US and the UK - and louder – the BoJ and the ECB - the delay is not worrying markets which have just increased the odds of recessionary signs forcing the central bank to act on 30 October,” said Michael Van Dulken, head of research at Accendo Markets.