BOJ won’t hesitate to ease again if needed

"I think BOJ can sit comfortably and wait for Japan to grow" - Japan Macro Advisors 

The Bank of Japan kept its monetary stimulus programme unchanged, as Governor Haruhiko Kuroda aims to strengthen economy's revival and counter a slowdown in inflation.

"The Bank of Japan will conduct money market operations so that the monetary base will increase at an annual pace of about 80 trillion yen", the bank said in a statement accompanying the monetary policy decision.

Latest data showed that the economy emerged out of recession in the final quarter of 2014; however, annualised growth of 2.2 percent was much below expectations, highlighting the impact of hike in consumption tax last April.

The central bank maintained its view that Japan's economy is recovering moderately and is on its way to reach the inflation target of 2 percent in the next fiscal year, as firms increase wages and spending. The BOJ also revised its assessment on output and exports upwards.

"I don't think there is any change in the price trend at the moment. That's why I don't think there is a need to do something additional," Kuroda told a news conference after a rate review. "If there is any change in the price trend, we won't hesitate to adjust policy."

He gave the aforementioned statement at a time when economists were expecting the central bank to ease gain around April.

"The BOJ does not seem to be fully convinced over the strength of the economic recovery, and we still think that policymakers will announce more stimulus in late April," Capital Economics said before Kuroda's statement, describing the central bank's assessment as "too optimistic."

Analysts criticized Kuroda's stimulus programme as the recovery in private consumption has been slower than expected and household sentiment was hurt by falling yen which drove up import costs.

"As long as exchange rates move stably in a way that reflects economic fundamentals, they shouldn't be negative for the economy," Kuroda said in response to the criticism.

The yen showed muted reaction when the BOJ kept its monetary policy stance unchanged, as expected. The pair was down 0.1 percent and last traded at 119.15, largely unchanged from the levels seen ahead of the central bank's policy decision. On the topside, immediate resistance is seen at 119.44 levels, above which gains could be extended to 119.64 levels. On the flipside, pair is likely to find support at 118.89 levels and further at 118.50 levels.

"USD/JPY has sold off to and is bouncing from the 4 month uptrend at 118.33. The market has recently attempted to break higher from a converging range, but has not sustained the break - but for now we will give the upside the benefit of the doubt while above the 118.33 4 month uptrend" Karen Jones, Head of Technical Analysis at Commerzbank.