Bank of Japan Retains Existing Policy Settings

May 23, 2012

A statement from the BOJ Board affirmed by unanimous vote existing policy settings.  The overnight uncollateralized interest rate has been zero to 0.1% since October 5, 2010.  The target hasn’t been greater than 0.5% since September 1995.  The asset purchase plan wasn’t changed either after having been enhanced on April 27 by 5 trillion yen to JPY 70 trillion.  Board members met over two days for a total of five hours and 57 minutes.

Officials didn’t change their assessment of Japan’s economy, which states that a shift toward a pick up of activity is under way but that activity remains more or less flat, dampened by soft export demand.  Consumption and private investment are increasing moderately, and public investment is increasing.  Housing is generally picking up, but industrial production, like exports, are more or less flat.  Officials expect a moderate recovery path led by post-earthquake reconstruction and firmer exports.  The challenge of defeating deflation persists, and central bank policy is deploying both low interest rates and quantitative easing powerfully overcome the problem.  For the time being, core CPI is seen hovering around zero, however.  Since the start of this year, bank current account balances held with the BOJ have averaged JPY 32.88 trillion versus JPY 31.80 trillion during the second half of 2011.  Excess reserves slightly exceed JPY 12 trillion.

Next month’s Policy Board meeting will take place on June 14-15.

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



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