BOJ keeps policy steady even as Japan slides into recession

“Inflation expectations appear to be rising on the whole from a somewhat longer-term perspective, although a few indicators have recently shown relatively weak developments”, it said in the dry, carefully phrased language of global central banks.

A likely moderation in underlying inflation will eventually force policymakers to introduce more stimulus, Marcel Thieliant at Capital Economics, said.

Almost half of analysts polled by Reuters last week predicted the BoJ will ease in January as continued declines in oil prices heighten the chance it will slash its price forecasts again.

The Bank of Japan saidit would buy a total of 1.2 trillion yen ($9.7 billion) in government debt from the market Wednesday as part of its plan to expand the monetary base at an annual pace of 80 trillion yen.

A slowdown in China, a big market for Japanese manufacturers, is adding to the drag on Japan’s economy.

The decision came in the wake of Thursday’s data showing exports in October fell for the first time in more than a year, stoking worries the world’s third-largest economy may struggle to recover from a recession. But a few analysts said the worst may be over, pointing to a 0.6 percent rebound in the value of exports from September and strength in U.S.-bound shipments. “Exports show signs of bottoming out, but given declining export volume, they are unlikely to become a driver of growth in the current quarter as effects of China’s slowdown and falling commodity prices are spreading to other countries”.

At the end-October meeting, the bank downgraded its growth outlook and postponed the timing to achieve its 2% inflation target by six months.

But the BoJ opted to do nothing at the end of its two-day policy meeting, as it did last month – when expectations were even higher it would take action but before news Monday that growth in gross domestic product (GDP) contracted for a second straight quarter. The government has signalled that the BoJ has done enough for now and instead are pressuring companies to spend their record profits more on wages and investment.