Bank of Japan Holds ‘Em

June 13, 2014

The Bank of Japan Board released a statement after its June meeting that reaffirmed existing policy and reads nearly identically to the prior meeting’s statement released May 21.  Current policy settings were first announced in early April 2013 as the first pillar among three that form Abenomics.  Stimulative fiscal policy is the second pillar, and the third one — structural and regulatory reforms especially involving the labor market — has become the weak leg of the stool.  The framework of monetary policy employs aggressive quantitative and qualitative asset buying to lift the monetary base by JPY 60-70 trillion per year and to lengthen the Bank of Japan’s JGB portfolio to an average maturity of about seven years.  The policy’s goal is a stable 2.0% pace of core underlying CPI inflation by 2Q15, but the policy is open-ended in terms of its duration.  Officials promise to stay the course until the inflation target is secured, and although Bank officials think the present policy framework will be up to that task, they also promise to augment the stimulus if that becomes necessary.  Today’s statement has a more favorable view about growth prospects in other advanced economies.  The overnight call money rate has not exceeded 0.5% since September 1995 and has lately averaged 0.07%.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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