The Bank of Japan kept monetary policy steady on Wednesday, suggesting that policymakers remain unfazed by slowing inflation and recent signs of weakness in the economy.
As widely expected, the BOJ left unchanged its pledge to increase base money, or cash and deposits at the central bank, at an annual pace of 80 trillion yen ($666 billion) through purchases of government bonds and risky assets.
Board member Takahide Kiuchi, who has expressed concerns that massive money printing could sow the seeds of a future bubble, called for the BOJ to cut back its asset buying.
He proposed reducing the base money target, and the annual pace of increase in the BOJ's government bond holdings, to 45 trillion yen. The proposal was rejected by a majority vote.
Investors will be watching whether Governor Haruhiko Kuroda, at his post-meeting news conference, will stick to his conviction of hitting his 2 percent inflation target two years into the stimulus programme.
Financial markets are focusing on a more critical meeting on April 30, when the nine-member board will review its long-term projections and may further cut its inflation forecast.
"Easing now would not help because it would weaken the yen, push up import prices and hurt real wages," said Daiju Aoki, economist at UBS Securities in Tokyo.
"I think the decline in consumer inflation is temporary. Inflation expectations are still intact," he said.
At Wednesday's meeting, the BOJ maintained its optimism that the economy will continue to recover moderately.
When it launched the stimulus programme in April 2013, which economists likened to firing a monetary bazooka, the BOJ pledged to achieve 2 percent inflation in roughly two years in a country mired in 15 years of deflation.
With that timeframe having passed, the central bank continues to gobble up around the same amount of government bonds issued each month. Its balance sheet has expanded by 156 trillion yen, roughly the size of Australia's economy.
But the economic recovery remains fragile and inflation has ground to a halt, casting doubt on the BOJ's argument that its asset purchases will pull Japan out of stagnation by nudging households and companies into boosting spending.
The BOJ now says inflation will hit 2 percent around this fiscal year ending in March 2016. But even that timeframe appears elusive as prices are seen staying flat or falling for much of this year on low energy costs and tame wage growth.
Some market players, albeit a minority, say the BOJ may ease again on April 30 if consumer spending remains weak and forces the bank to cut its bullish price forecasts.
But some central bankers doubt whether buying more assets will give any meaningful boost to economic activity, pointing to a lack of a clear pick-up in capital expenditure despite the massive money printing so far.
Many BOJ officials are hoping that rising wages and the benefit from lower fuel bills will lift consumption and help accelerate inflation toward year-end.
With the outlook so uncertain, the BOJ appears to be in no mood to celebrate the second anniversary of its stimulus.
A year ago, when inflation was comfortably above 1 percent, Governor Haruhiko Kuroda proudly preached to new graduates joining the central bank of the need to "meet deadlines" for work.
There was no mention of meeting deadlines in his speech last week, when he told newcomers in the central bank that people should always be ready to correct mistakes of the past.
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