Bank of Japan Review

October 7, 2011

The BOJ Policy Board, which eased earlier this year in March and August, met over two days for six hours and one minute and did the following

  • Retained a 0.0-0.1% target on overnight money rates as expected.  This near-zero interest rate policy (ZIRP) has been in effect since March.  Even more telling, the rate hasn’t surpassed 0.5% since September 1995.
  • Extended a special lending facility for firms directly hurt by the Sendai earthquake to April 2012 from October 2011.
  • Left the ceiling on asset purchases at JPY 15 trillion and on other credit facilities at JPY 35 trillion.
  • Modestly upgraded its economic assessment to “activity has continued picking up” by deleting a reference to residual supply-side post-earthquake restraints.  Officials stuck to a forecast calling for a modest recovery path with support from both exports and domestic demand.  Officials look for core CPI inflation to hover around zero.
  • Pledged to keep its near-ZIRP policy until satisfied that “price stability is in sight.”

Nothing in the statement is especially new or newsworthy.  Officials are in a guardedly optimistic wait and see mode, believing the recovery to be intact but warning that the impact on Japan of external risks from Europe need to be monitored closely.  Tellingly, the statement fails to protest yen strength.  A second Board meeting at the end of this month will publish new quarterly price and growth forecasts.

Copyright 2011, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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