The Bank of Japan refrained from adding extra stimulus as policy makers said the world’s third-biggest economy can maintain a recovery even with last week’s increase in the sales tax.

Gov. Haruhiko Kuroda and his board kept a pledge to expand the monetary base at a pace of 60 trillion yen to 70 trillion yen ($681 billion) per year, the central bank said in a statement Tuesday in Tokyo, as forecast by all 36 economists in a Bloomberg News survey.

The central bank will add more stimulus by July to help drive inflation closer to a 2 percent target and to strengthen the economy ahead of another possible tax increase next year, a Bloomberg News survey indicates. The economy has continued to recovery moderately, “albeit with some fluctuations due to the consumption tax hike,” the BOJ said Tuesday. 

“I expect the BOJ to add expansive policy between May and July,” Yasuhide Yajima, chief economist in Tokyo at NLI Research Institute, said before Tuesday’s decision. “The economy will slow down and price increases will be sluggish from April to June because of the sales-tax hike.”

The yen weakened after the announcement, and was trading at 102.92 per dollar at 12:00 p.m. in Tokyo, up 0.2 percent. The Topix index of shares was down 1.6 percent at the lunch break.

The BOJ is gauging the extent of an anticipated setback to the economy and prospects for achieving its 2 percent inflation goal after last week’s 3 percentage-point increase in the sales tax, the first since 1997. The price goal excludes the effects of changes in the sales tax.

The central bank’s benchmark price gauge rose 1.3 percent in February from a year earlier, and companies see price gains persisting for at least the next five years, in what would mark an end to 15 years of deflation. The economy is forecast to shrink an annualized 3.5 percent in the three months from April, breaking a projected six straight quarters of growth.

Kuroda has said he will adjust record easing that the BOJ began in April last year should prospects for achieving the price target within an initial two-year timeframe be jeopardized. The challenge for Kuroda will be to avoid any perception of incremental policy steps, an approach he has vowed to avoid.

Forty-four percent of economists predict the BOJ will add to stimulus in July, when the strength of an economic rebound will become clearer, the Bloomberg News survey showed.

The central bank will probably double the annual pace it accumulates exchange-traded funds to 2 trillion yen in months ahead, according to the poll. The bank could boost annual bond purchases by at least 10 trillion yen, according to the survey.

Finance Minister Taro Aso said last week that the next few months will be key in a decision on whether to go ahead with a further increase in the sales tax to 10 percent as the government tries to rein in the world’s largest public debt burden.

“Given it takes months for the effects of monetary policy to penetrate the economy, I predict easing later this month,” said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co. in Tokyo. “It’s hard for the BOJ to achieve the same impact with stimulus again so a surprise has to come from the timing.”

Seventy-eight percent of the economists in the poll said Abe will have to compile another stimulus package in the fiscal year starting this month to support the economy.

Kuroda’s press conference after a policy meeting usually starts at 3:30 p.m. in Tokyo.

Kuroda said last month that Japan won’t see a repeat of the recession that followed the sales tax increase in 1997, pointing to Japan’s now-stronger financial system and an absence of a regional financial crisis that hurt the country’s exports then. (Bloomberg)