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Bank of Japan holds off stimulus

April 28, 2016

The Bank of Japan has caught traders in Tokyo unaware as it held fire on a fresh round of expected stimulus measures. Analysts wondered whether it had anything left in its arsenal to crank up the economy.

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Tokyo stock exchange
Image: Reuters/Y. Shino

Traders were caught off guard Thursday as Japan's central bank decided to postpone additional stimulus measures to boost the ailing domestic economy.

Tokyo's Nikkei stock index plunged 3.6 percent as exporters were hit by the renewed surge of the yen in the wake of the Bank of Japan's move.

"Markets now think the impact of any more BoJ easing measures are going to be limited," Tokyo-Mitsubishi UFJ analyst Minori Uchida said in a statement.

The central bank decided to push back its timeline for a 2-percent inflation target, now expected before early 2018 rather than by September 2017. It underscored the challenges in conquering years of growth-sapping deflation.

Looking for a silver lining

The bank's inflation target and huge asset buying have been cornerstones of Tokyo's drive to reignite Japan's economy. Experts had expected more easing sooner rather than later as fresh data revealed consumer prices had fallen the most in three years, with household spending remaining weak.

Japan's economy has largely defied several years of central bank and government remedies aimed at boosting prices and triggering broader economic activity.

The Asian nation's gross domestic product (GDP) shrank by 0.3 percent in the final quarter of last year. There are concerns that the January-March data will also come in weak.

hg/cjc (Reuters, AFP)