Bank of Japan: No Change in Stance or Overall Assessment

September 4, 2014

The statement released after the September monetary policy meeting hardly changes wording of the August statement.  In two sentences of paragraph three, clauses are inverted, and the main substantive modification is a downgrade of the view on housing investment.  The more incredible thing about the release that left a virtual zero interest rate stance imposed by quantitative and qualitative stimulus as they’ve been since April 2013 is how static have been all the statements since then.  Over these 17 months, officials have always maintained that the outlook for Japan’s economy is “moderate recovery.”  Three risks to that baseline prognosis have been cited each meeting: 1) developments in emerging and commodity-exporting economies, 2) the prospects for the European debt problem, and 3) the pace of recovery in the U.S. economy.  Since the start of 2014, it’s been said that on-year inflation minus changes in fresh food and effects of the sales tax hike would likely be around 1.25%.”  While the policy is open-ended in the sense that it will be maintained until the goal of 2% inflation is secured in a way that officials believe won’t be jeopardized by terminating the stimulus, one of the nine Board members, Mr. T. Kiuchi, has submitted a suggested modification to limit the quantitative stimulus to no more than two years, and each time his proposal was rejected by the other eight Board members.  All of this goes to show that the more things change in Japan, the more the Bank of Japan remains the same, and it raises questions about the pertinence of having Board meetings every month when policy in fact appears on auto-pilot steering a course that was charted in April 2013.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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