Bank of Japan Upgrades Assessment But Leaves Policy Unchanged

September 17, 2009

Following 6 hours 3 minutes of deliberations over two days, the BOJ Policy Board voted unanimously to keep its overnight target rate at 0.1%, where such has been since a 20-basis point cut in December 2008, and made no change in its quantitative measure to promote corporate financing conditions.  None of this was a surprise.  Japan may not get a rate increase until 2011.

The central bank’s monthly assessment of the economy was upgraded, however, to “showing signs of recovery.  Positive growth is predicted in the second half of fiscal 2009, that is from October onward.  Officials still stressed the high level of uncertainty surrounding the outlook and the prevalence of forecast risks which remain skewed to the downside.  Negative on-year CPI inflation is expected to continue lengthening in the short run and to moderate later this fiscal year only assuming that long-term inflation expectations remain stable.  It will be necessary too for oil not to turn upward.

While exports, industrial production, and public investment are pulling growth upward and the inventory adjustment is progressing, personal consumption “remains generally weak,” and private investment is still declining amid weak profits.  The labor market and income growth have worsened.

Click here to view today’s statement from the Bank of Japan.  This year’s remaining Policy Board meetings are scheduled for October 13-14, October 30th when new forecasts will be unveiled, November 19-20, and December 17-18.  Minutes of this week’s meeting will be published on October 19th.

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



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