BOJ maintains massive stimulus, rosy economic outlook

Says exports have been picking up with moderate recovery in overseas economies

The Bank of Japan maintained its ultra-loose monetary policy on Thursday and reiterated the economy is recovering moderately, in a nod to signs of a pick-up in exports that is key to sustaining the momentum generated by premier Shinzo Abe's stimulus.

Markets are focusing on what Governor Haruhiko Kuroda will say in his post-meeting news conference about speculation of more easing by the European Central Bank and uncertainty about when the US Federal Reserve will slow its asset purchases.

As widely expected, the Japanese central bank maintained the monetary framework it put in place in April, which aims to achieve 2% inflation in roughly two years by doubling base money through aggressive asset purchases.

"Japan's economy is recovering moderately," the BOJ said in a statement announcing the decision, unchanged from the assessment it made last month.

"Exports have generally been picking up," reflecting a moderate recovery in overseas economies, it said.

OVERSEAS RISKS PERSIST

The world's third-largest economy slowed in July-September as exports and household spending moderated, although analysts expect growth to accelerate in the current quarter as consumers try to beat the sales tax hike next April.

Soft exports have been a key concern for BOJ officials, who hope the global economy will pick up in time to make up for the expected downturn in household spending after the tax hike.

A modest rebound in export volume in October likely tempered concerns held by many BOJ officials about weakness in shipments.

But with momentum lacking in emerging Asian nations, significant buyers of Japan's exports, Kuroda will likely remind markets the BOJ is watching overseas headwinds and stands ready to ease again if its inflation goal comes under threat.

Activity in China's vast factory sector grew at a milder pace in November on shrinking new export orders, a preliminary private survey showed on Thursday, bolstering expectations that the economy could lose some vigour in the fourth quarter.

Pessimists in the BOJ's nine-member board have warned of sluggish growth in emerging Asia and a lack of clear pick up in exports, despite the benefits from a weak yen.

An October 31 meeting revealed the biggest rift in the BOJ board since Kuroda launched his aggressive stimulus campaign in April, as three members dissented against the central bank's rosy outlook for achieving its price target.