Bank of Japan: No Policy Changes

April 10, 2012

The Policy Board deliberated for 5 hours and 13 minutes over Monday and Tuesday and, as expected, decided unanimously to retain a 0-0.1% target overnight interest rate range and not to expand quantitative easing beyond the JPY 65 trillion ceiling established after a hike of JPY 10 trillion announced in February.  The last interest rate target reduction was made last October.

The new statement from the Board observes that exports continue to be more or less flat and that “overseas economies on the whole have not emerged from a deceleration phase.”  But components of domestic demand like consumption, investment and public investment are rising and overall “economic activity has shown some signs of picking up, although it has remained more or less flat.”  This was same view as before, and prospects for a moderate recovery path in the future hinge on better exports and reconstruction spending from last year’s earthquake and tsunami.  Financial conditions have been stable, and core inflation is projected to remain near zero “for the time being.”

While professing their commitment to conquering deflation and supporting government policy aims, BOJ Board officials are equally committed to a lower inflation target (1%) than other central banks including the European Central Bank.

Today’s statement includes details of how a JPY 1.0 trillion U.S. dollar dollar lending facility, which was unveiled last month, will operate.  The next BOJ policy meeting on April 27 will publish new macroeconomic forecasts.  There has been some speculation that the asset buying program could be expanded at that time, but Governor Shirakawa asserted today that no pre-committed decisions have been made regarding that meeting.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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