TOKYO (Alliance News) – The Bank of Japan maintained its monetary policy as widely expected at its first meeting of this year on Tuesday and upgraded its economic outlook, while leaving its inflation forecast unchanged.

Governor Haruhiko Kuroda and his board members on Tuesday decided by a 7-2 vote 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% interest rate on current accounts that financial institutions maintain at the bank.

The central bank will purchase government bonds so that the yield of 10-year JGBs will remain at around zero percent.

Policymakers unanimously decided to extend the deadlines for applications for some of its lending programmes by one year.

In the Outlook for Economic Activity and Prices, the bank said the economy is likely to continue growing at a pace above its potential through fiscal 2018.

For the current fiscal, the bank projected 1.4% growth instead of 1% forecast in October.

The BoJ upgraded its growth outlook for fiscal 2017 to 1.5% from 1.3% and that for the fiscal 2018 to 1.1% from 0.9%.

The bank expects inflation move closer to 2% as the aggregate supply and demand balance improves and medium- to long-term inflation expectations rise.

The BoJ kept its forecast for inflation unchanged for both fiscal 2017 and 2018. For the fiscal 2017, inflation is expected to be 1.5% and 1.7% in the fiscal 2018.

Marcel Thieliant, a senior Japan economist at Capital Economics, expressed doubt that the bank will be able to tighten policy anytime soon as the tailwind from a weaker yen will prove short-lived.

The bank has had little success in lifting expectations of future price gains among households and firms, the economist noted. Once the tailwind from a weaker exchange rate fizzles out, price pressures should therefore start to moderate again, Thieliant added.

Copyright RTT News/dpa-AFX

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