TOKYO - Japan's central bank kept its ultra-lax monetary policy unchanged Thursday, forecasting that growth in the world's third-largest economy would remain slow but steady through the fiscal year ending in March 2018.
Most analysts were expecting the Bank of Japan to stand pat. In a statement, the BOJ said demand spurred by preparations for the Tokyo 2020 Olympics will help support growth in the coming year or two.
But it warned of risks to that scenario from global trends, including US economic policies, Britain's exit from the European Union and other geopolitical trends.
"With regard to the outlook for economic activity, risks are skewed to the downside, particularly those regarding developments in overseas economies,'' it said.
The Bank of Japan is pumping trillions of yen into the economy each month through asset purchases intended to counter deflation and boost growth.
Results have been mixed, and inflation remains well below the 2% target set in 2013. The central bank adjusted its inflation forecast for this year to 1.4% from an earlier forecast of 1.5%.
Marcel Thieliant of Capital Economics said the bank was "too optimistic'' about inflation, because labour shortages are failing to yield the wage increases needed to get consumers to open their wallets.
Recently, exports and public spending have helped drive growth, though the economy expanded at a slower than hoped for 1.2% annual pace in the last quarter of 2016.
Construction in preparation for the 2020 games is expected to pick up next year, though the BOJ has estimated it will contribute only 0.7% of GDP in 2018.