Bank of Japan officials are gaining confidence in the resilience of the nation's economy, while keeping a close eye on the impact of low oil prices on inflation expectations, according to people familiar with the central bank's discussions.
Indicators have improved in the run-up to the BOJ's policy decision due Friday, with revised gross domestic product data showing that Japan averted a mid-year recession and that capital spending increased. Data since the last meeting in November show the economy gradually has been gathering momentum in line with the bank's expectations, according to the people, who asked not to be identified due to the private nature of the talks.
Though Japan's inflation rate remains distant from the BOJ's 2 percent target, the board has decided to keep policy unchanged this year, saying low oil prices have held down consumer costs. Given the renewed slide in crude oil in recent weeks, and the risk that it will suppress prices long term, officials are closely watching gauges of inflation expectations, the people said.