TOKYO - The Bank of Japan on Wednesday held off launching fresh stimulus, even as weak growth figures earlier this week aggravate concerns about the strength of a recovery in the world's number three economy.

Data confirmed the economy pulled out of recession in the fourth quarter of last year but annualised growth of 2.2 per cent was much weaker than expected, underscoring the lingering impact from a sales tax hike last April.

Still, the BOJ stuck to its view that the economy is recovering moderately, and on track to hit 2 per cent inflation next fiscal year as companies raise wages and spending.

With industrial production up 1.0 per cent in December and exports having risen the most in a year, the central bank also revised up its view on output and exports.

"Industrial output is picking up," the BOJ said in a statement issued after the meeting. That was a brighter view than last month, when it said output was "bottoming out."

As widely expected, the BOJ maintained its stimulus programme that pledges to print money at an annual pace of 80 trillion yen.

A much-awaited rebound in exports has offered some hope for BOJ policymakers, who prefer to hold off on expanding stimulus for now, even as falling oil prices anchor inflation below the BOJ's 2 percent target.

But the rebound in private consumption has been weaker than expected, underscoring concern shared by some central bankers that the economy was still reeling from the post-tax hike pain.

Underscoring the worry, the BOJ said in the statement that while private consumption was resilient, its recovery "has been sluggish in some areas."

Markets are focusing on how BOJ Governor Haruhiko Kuroda will respond to criticism, mainly from opposition lawmakers, that his radical stimulus is driving excessive falls in the yen that hurt consumer sentiment by driving up import costs.

With the BOJ's massive bond purchases drying up liquidity and heightening volatility in the bond market, many within the BOJ hope to keep policy steady for now. Advisers to Prime Minister Shinzo Abe back the BOJ's wait-and-see stance, worried that more easing could send the yen to damagingly low levels.

"The BOJ is less likely to ease policy in the near term," said Daiju Aoki, an economist at UBS Securities. "If it were to ease further, this would offset wage growth. There would be no positive impact in the short term."

Kuroda has been unwavering in his view that a weak yen is good for the economy, and so will reiterate that the BOJ will do whatever it takes to hit 2 per cent inflation, analysts say.

REUTERS, AFP