The Bank of Japan on Friday held off new monetary easing measures despite fears about the impact of a sales tax hike on the country's economic recovery and a U.S. budget crisis that could see Washington default.
After a two-day policy meeting, BOJ officials issued an upbeat statement that said the economy was still "recovering moderately" while overseas economies were "heading toward a pick-up".
But policymakers also warned of risks on the horizon.
The bank had been widely expected to hold fire as it studies how its unprecedented monetary easing plan, launched in April, was rippling through the economy.
The meeting Friday comes three days after it published its Tankan survey, which soared business confidence in Japan at a more than five-year high -- good news for Prime Shinzo Abe's bid to revitalize the economy.
The closely watched indicator was seen as key to Abe's decision this week to press on with a plan to hike sales taxes to 8%, from 5%, in April.
The rise is viewed as crucial for Japan to shrink what is the rich world's heaviest public debt burden, but some fear it will derail the premier's economic policy blitz dubbed Abenomics.
Adding to concerns is the gridlock in Washington over a budget deal that economists fear could extend into the middle of the month, when the U.S. runs out of cash to service its debts. If the country's borrowing limit is not raised before an Oct 17 deadline the country will default, sending shockwaves through the global economy.© (C) 2013 AFP