Bank of Japan Does Nothing New

August 10, 2010

Although talking things over for more than six hours and devoting considerable discussion to the risks of a rising yen, Japan’s central bank Policy Board in the end were more than happy not to upstage the FOMC, which releases a statement on U.S. monetary policy later today.  Bank of Japan officials

  • Left the overnight money target at 0.1%.  It’s been there since December 2008, but the rate was only 0.5% when the world financial crisis began.
  • Unveiled no new measures to influence long-term interest rates or promote lending to corporations.
  • Retained the same baseline economic forecast that the economy will follow a recovery path and that on-year core CPI deflation will be slowing.
  • Called risks to the forecast “balanced.”
  • Reaffirmed the promise to maintain an “extremely accommodative financial environment.”
  • Decided that the economy is handling the challenge of a rising yen better than it was doing last autumn but that this situation needs to be watched.

The decision to leave the key interest rate unchanged was made by another unanimous 9-0 vote.  As noted in my earlier preview, the confidence of monetary officials is not shared by Japanese stocks and bonds. Stocks continue to under-perform bourses in other countries.  The Nikkei is down almost 15% since April 26 and 44% weaker than its level when the global financial crisis began three years ago.  Ten-year JGB yields are barely above 1.00%.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.



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