2013.07.1106:00:23UTC+00Bank of Japan cuts forecasts but still upbeat

The Bank of Japan left its policy unaltered Thursday, but trim its inflation and economic forecasts from its April projections while using slightly more upbeat language in its evaluation of the economy.

The central bank’s median forecast for core inflation in the fiscal year ending in March 2014 eased to a 0.6% hike in prices from a 0.7% increase tipped in April, while kicking down its real economic development estimate to 2.8% from 2.9%.

Likewise, for the 2014-15 fiscal year, the core consumer price index was assumed to increase 3.3%, down from April’s 3.4% forecast, with development at 1.3%, compared to 1.4% previously.

The Bank of Japan hopes to push the core CPI to 2% by 2015.

The Bank of Japan also included inflation forecasts excluding the effects from the government’s scheduled increase in the national sales tax, which put fiscal 2014 inflation at 1.3%.

The sales tax is due to rise in two stages in April 2014 and October 2015, to 8% and 10%, respectively.

However, the bank also said the economy was “starting to recover moderately” after saying in June that it was “picking up,” and its description of exports went from having “started to pick up” to “have been picking up.”

The central bank statement also downplayed the slightly weaker forecasts for inflation and gross domestic product, saying they were “broadly in line with the April forecasts.”

The lack of new easing action by the Bank of Japan was widely expected after it rolled out aggressive new easing measures at its April meeting.

The yen drove higher following the decision, as the dollar bought ¥98.60, down from ¥99.09 ahead of the announcement.

The Japanese stock markets were closed for the lunch break when the decision was released, but Singapore-traded Nikkei Stock Average futures suggested the afternoon session reopen would see a mild extension of the 0.2% loss suffered in morning trade.