Roundup: BOJ chief remains upbeat on economy despite latest raft of downbeat macroeconomic indicators

Japan's latest economic indicators painted a less-than-stellar outlook for the future of the world's third-largest economy, with wholesale prices slumping and consumer confidence retreating, according to the latest government statistics. But despite the disappointing macroeconomic data, the central bank here said Friday it would hold off on any additional easing.

The latest macroeconomic data released from Japan's Cabinet Office Friday showed that consumer confidence had worsened here for the first time in five months in April, owing to the prices of commodities being raised in the recording period, in an ongoing attempt by businesses to counter the fallout of last April's sales tax hike from 5 to 8 percent.

According to the latest government figures, the index of sentiment among households made up of two or more people fell 0.2 point from March to 41.5, on a seasonally adjusted basis, meaning of those surveyed the majority of them hold a pessimistic view of the economy in the coming six months, compared to those who hold an optimistic view.

The Cabinet Office's report showed that consumers' willingness to purchase new durable goods dropped 0.9 point to 39.7, while their views on livelihoods reversed 0.4 point to 38.4. On income growth assessment, the figure retreated by 0.1 point to 39.3, although the view on the employment situation revealed an uptick in the recording period, the figures showed.

Wholesale prices excluding the impact of last April's sales tax hike, also charted a decline in April, dropping 2.2 percent from a year earlier, the Bank of Japan said separately on Friday, citing the global oil glut as weighing on prices.

The BOJ's latest figures showed that the index of corporate goods prices stood at 100.7 against the 2010 base of 100. Taking into account the effects of the tax hike, the nation's wholesale prices fell 2.1 percent, the BOJ said, standing at 103.6 and dropping for the first time since March 2013.

The central bank said that fuel and coal prices were weighing heavily, owing to the current glut, with prices down more than 23 percent from a year earlier. Chemical products related to oil also fell 5.9 percent, the bank said.

Import prices dropped 9.5 percent, while exports were up 3.2 percent in yen terms in the recording period, from a year earlier, the BOJ's report also showed.

The bank also noted that on a monthly basis, wholesale prices were up 0.1 percent in April, after a 0.3 percent rise in March.

But despite the latest tepid slew of macroeconomic readings, Bank of Japan Governor Haruhiko Kuroda told a news conference Friday that the bank would continue to hold off on any further monetary easing, despite conceding recently that it would delay the timing of reaching its lofty 2 percent inflation target.

He reiterated the bank's confidence in hitting its target and said, for now, no additional changes would be necessary.

"The deadline we set and our clear commitment to do whatever is necessary to achieve the target has significantly changed inflation expectations of companies and households," Kuroda said at the BOJ headquarters.

He added that the bank's inflation timeframe had been delayed due to flailing oil prices, but inflation trends reflecting an improving economy meant no further intervention was necessary yet.

"Despite some unexpected events, I feel encouraged by the fact that the big picture of economic development for these two years is in line with what we envisioned at the outset," Kuroda said, adding, "therefore don't think additional monetary easing is necessary at this stage."

The central bank chief's remarks came following the bank at the end of April extending its 2 percent inflation timeframe from this fiscal year until the first half of fiscal 2016 as consumer prices have been impacted by the global oil glut and revised downwards from a 1 percent rise forecast in January.

The BOJ, however, opted to hold off on additional monetary easing, choosing to maintain its expansion of the monetary base at an annual pace of 80 trillion yen (about 672 billion U.S. dollars), despite the latest economic figures showing that inflation here has effectively ground to a halt.

The bank said it now expects consumer prices to rise 0.8 percent from the previous year, from an earlier projection of 1 percent and the BOJ also trimmed its inflation projection for fiscal 2016, saying it expects consumer prices to rise 2 percent, down from a prior forecast of 2.2 percent.

While stating the economy is recovering moderately, owing to an uptick in exports and industrial production and aided by an improving job market and wages, BOJ Governor Kuroda stated in a previous press conference that restoring fiscal discipline was of paramount importance, but maintained, in contrast to some leading economists, that consumption is steady and that inflation will improve.

Kuroda has said that it is very important to restore fiscal discipline in Japan and the government has said it will come up with a plan to achieve a primary balance surplus in fiscal 2020, a goal also disputed by leading economists who a quick to point to Japan's debt burden standing at more than twice the size of its economy.

Kuroda, again in contrast to some leading economists, also believes that consumption and domestic demand remains firm as a whole, as exports are rising moderately and that Japan's economy is likely to see a positive cycle of income and expenditure kick off for both households and companies.

Despite the current pause in inflation the central bank chief believes that inflation is expected to rise henceforth and, as such, no further monetary easing is necessary.

"It's true that the timing for achieving 2 percent inflation has been delayed somewhat to the first half of fiscal 2016 from a period centering around fiscal 2015. But trend inflation is improving steadily and is expected to continue improving. As such, I don't think there's a need to ease policy further now," Kuroda said.

But Kuroda, as has consistently been the case, said that if and when the bank decides that it needs to take aggressive action to maintain its reflationary efforts, it will not hesitate in doing so. Endi