Bank of Japan holds fire on stimulus after upbeat GDP data

The Bank of Japan on Friday held off launching more stimulus as its chief said the world's number-three economy was on the upswing, days after data showed stronger-than-expected growth in the first quarter. The upbeat figures eased pressure on policymakers who kept the central bank's annual 80 trillion yen ($662 billion) monetary easing programme in place after a two-day meeting. But some analysts say further action will be needed later in the year. On Wednesday the government released figures showing Japan's economy, which sank into a brief recession last year, expanded by a better-than-expected 0.6 percent from the previous quarter. In annualised terms, the economy expanded by 2.4 percent in the January-March period -- well ahead of tepid growth in the United States-- as capital spending and the housing market showed signs of strength, although exports dipped slightly and consumer spending was weak. BoJ governor Haruhiko Kuroda said Friday that the stronger data was behind the bank's more upbeat view. "It is not that something about the economy dramatically changed -- it has been steadily improving," he told a press briefing on Friday. "That improvement is likely to continue, and so we have taken a step forward in our assessment to fit the current situation." The central bank's post-meeting statement slightly tweaked the wording on its assessment of the economy to suggest the outlook was improving. Kuroda has been forced to push back a timeline for hitting a 2.0 percent inflation target -- a cornerstone of Prime Minister Shinzo Abe's plan to kickstart the deflation-plagued economy -- although he insists that healthy price rises are around the corner. Stripping out the impact of a sales tax hike last year, Japan's inflation rate in March came in at a tepid 0.2 percent from a year ago, well short of the BoJ's target. Kuroda on Friday acknowledged the challenges in the government's ambitious goals to grow the economy. "It won't be easy, but it's not impossible," he said. Tepid inflation data has spurred speculation of further easing measures. "The Bank of Japan's more upbeat economic assessment today suggests that the introduction of more stimulus as early as July is off the table," Marcel Thieliant from Capital Economics said in a commentary. "However, we remain convinced that the prospect of prolonged below-target inflation will convince policymakers to step up the pace of easing by October." In currency trading, the dollar slipped to 120.80 yen from 120.91 yen just before the BoJ's announcement, and well off the 121.07 yen in New York.