After a two-day policy meeting, it decided to leave other measures unchanged, including its policy interest rate between 0 per cent and 0.1 per cent.

The Bank of Japan (BOJ) will continue purchases at the current pace of around 6 trillion yen ($38.1 billion) per month till then, it said in a statement on monetary policy.

"It is absolutely possible to decide on a rate hike [in July], depending on the data and information on the economic and price situation that will be available by then," bank governor Kazuo Ueda told a press conference.

The country’s economy in January-March shrank by 0.5 per cent from the previous quarter, or at an annualized pace of 1.8 per cent, with consumer inflation moderating rather than accelerating.

Real interest rates in the country will remain negative, with the market expecting inflation of around 1.5 per cent in the next 10 years.

“Japan's economy has recovered moderately, although some weakness has been seen in part….Exports have been more or less flat…. Industrial production has been more or less flat as a trend….. With corporate profits improving, business fixed investment has been on a moderate increasing trend. The employment and income situation has improved moderately. Private consumption has been resilient,” the monetary policy statement noted.

“Meanwhile, underlying CPI [consumer price index-based] inflation is expected to increase gradually, since it is projected that the output gap will improve and that medium- to long-term inflation expectations will rise with a virtuous cycle between wages and prices continuing to intensify. In the second half of the projection period of the April 2024 Outlook for Economic Activity and Prices (Outlook Report), it is likely to be at a level that is generally consistent with the price stability target,” it added.

Fibre2Fashion News Desk (DS)