Bank of Japan Policy Meeting Preview

June 15, 2009

The lessening intensity of Japan’s recession will enable BOJ officials to refrain from any further stimulus announcements.  The rate target will be left unchanged, and new forms of quantitative easing are unlikely to be unveiled.  Such was cut twice in the final quarter of 2009 by 40 basis points in total but has remained at 0.1% since December.  Officials have engaged in fewer unconventional actions this year to promote liquidity than has the Fed or Bank of England.  Outright monthly purchases of JGB’s were increased in March to Y 1.8 trillion from Y 1.4 trillion, and the range of eligible collateral was expanded in May.  Despite a return to deflation, officials have resisted taking more drastic action and consider their experience with quantitative easing in 2001-6 to have produced as many drawbacks as benefits.

At the May policy meeting, BOJ officials upgraded their economic assessment from “deteriorating sharply” to “deteriorating but exports and production are beginning to level off.”  Another economic assessment upgrade this month is probable.  Japan has had its share of green shoots.

  • The jump of industrial production in April was revised to 5.9% from 5.2%.  Increases are expected in May and June.
  • First-quarter GDP contraction was revised inward to 14.2% saar from 15.2% reported initially.
  • Seasonally adjusted exports in April rose 7.2% from March.
  • The index of leading business indicators was better than expected in April.
  • Consumer confidence hit a 14-month high in May and has recovered 9.5 points since December’s low.
  • The Economy Watchers Index recovered 8.3 points between March and May.
  • Private core domestic orders for machinery are not declining as rapidly as such were in late 2008.
  • The yen is softer now and thus more competitive than its end-2008 levels.

The BOJ announcement, due Tuesday, tends to arrive around 04:00-0:500 GMT.

Copyright 2009 Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



Comments are closed.