Bank of Japan: No Additional Policy Initiatives this Month

February 14, 2013

The February meeting of the Bank of Japan Board never figured to be significant.  The five-year terms of Governor Shirakawa and Deputy Governors Nishimura and Yamaguchi expire the middle of next month, and they had indicated previously that BOJ policy had been eased as much as they were comfortable doing.  A by-product of accelerated quantitative stimulus since last autumn has been significant yen depreciation, and this has drawn criticism from foreign governments and been placed high on the G20 agenda. 

The yen is trading roughly 5% lower against both the dollar and euro since the January Board meeting.  Over the last three months, it has depreciated by 14.8% against the dollar and 17.8% versus the euro.  Developing economy leaders as well as those in the Group of Seven want a discussion of this development at the upcoming G20 confab.

A statement released by the BOJ Board today retained a virtual zero interest rate policy and reaffirmed policy changes unveiled at the prior meeting in January.  Like the government earlier this week, the Board also upgraded its economic assessment, asserting that the economy appears to have stopped weakening (even though a 0.4% annualized GDP growth rate in 4Q12 was reported earlier in the day).  Officials expect core inflation to dip under zero for the time being on some adverse base effects and thereafter to return to zero.  To underscore that it may take considerable time before the 2% inflation target is achieved, last month’s quarterly forecast penciled in a range of 0.3-0.6% for core CPI in the fiscal year that begins this April.

The last Board meeting to be presided over by Governor Shirakawa is scheduled for March 7.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without expressed permission.



Comments are closed.