Bank of Japan Keeps Same Policy Stance and Economic Assessment

August 7, 2015

A statement almost identical in text the the prior one in July was released after five hours and 21 minutes of deliberations over two days by the Bank of Japan’s Policy Board.  In an assessment proclaiming the economy in continuing moderate recovery despite core inflation of around zero for now, housing construction was upgraded marginally, a comment about favorable business sentiment was dropped, and every other detail read the same as in July statement.  The economic forecast is unchanged, and it points to rising inflation next year that will approach the 2% target sometime after the first calendar quarter.  One weak link in the forecast involves oil prices, which are assumed to be higher than current levels and on a flat to rising path.  Achievement of 2.0% inflation could be delayed if oil follows a softer-than-assumed path.  Risks to the outlook still include economic developments in emerging and commodity-exporting economies, Euroland’s debt problems and the impact of such on eurozone growth and inflation, and the pace of the U.S. recovery after the Fed starts raising interest rates.  The decision by the BOJ Board to maintain quantitative stimulus at a JGB purchase rate of JPY 80 trillion per year until 2% core inflation has returned and appears likely to be sustained again drew a single dissent from Takahide Kiuchi, who favored cutting that figure to JPY 45 trillion and making the commitment less open-ended from a duration standpoint.  Kiuchi prefers that continuing QQE be contingent on the judgment that the programs benefits outweigh its damages. 

The Board also released a schedule of meetings through the end of 2016.  Remaining ones this year will wind up on September 15, October 7, October 30, November 19 and December 18.  As announced earlier, a new framework of reviews is being introduced next year, reducing the number per year to eight a la the Fed and ECB from 14 as maintained currently.  The eight meetings in 2016 will end on January 29, March 15, April 28, June 16, July 29, September 21, November 1, and December 14.

Copyright 2015, Larry Greenberg.  All rights reserved.   No secondary distribution without express permission.

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