The Bank of Japan maintained its view on the Japanese economy in a monthly report today, saying the world's second-largest economy continues to recover and it expects consumer prices to flatten out or rise slightly towards the end of this year.
"The economy continues to recover," the central bank said in its October report. "Capital spending has continued to increase against the background of high corporate profits and a modest improvement in business sentiment."
The BOJ upgraded its view on housing investment, saying it has been increasing recently. In its August report, it said housing investment had been nearly flat.
Japan's economy has been plagued by deflation for nearly eight years after a series of recessions in the past decade. But the core consumer price index (CPI), a benchmark for monetary policy, has been hovering just below zero in the past two years and a recent steady recovery and rises in oil prices have led economists and central bankers to believe that deflation is nearing an end.
The BOJ said in the report it expects consumer prices to flatten out or start rising slightly toward the end of 2005 because downward pressure from declines in prices of rice and cuts in electricity and phone charges will ease.
The BOJ upgraded its view on the economy for three months in a row from July to September as the economy emerged from a soft patch, helped by a rebound in exports and the end of an inventory adjustment in the information technology sector.
Earlier today the BOJ policy board decided by a 7-2 vote to maintain its ultra easy monetary policy.