Bank of Japan Kept Same Policy Parameters

February 18, 2015

After meeting for a shorter-than-usual five hours and two minutes on Tuesday and Wednesday, the Bank of Japan left its monetary stance, consisting of a 0.0-0.1% overnight money range and asset purchases of JPY 80 trillion per year, consisting mainly of longer-term JGBs with the intent of expanding the average maturity of the central bank’s JGB portfolio to 7-10 years.   These parameters have been maintained since an expansion of the stimulus last October 31.

A statement from the Policy Board revealed that Takahide Kiuchi had dissented from the 8-1 majority decision, as he has always done.  Kiuchi opposes the open-ended duration of asset buying determined by when the 2% core inflation is attained and not by a specified number of months.  He also objected to last October’s expansion in the size of annual asset purchases and at each ensuing meeting has recommended going back to the original policy settings.  One of the distinguishing properties of Japan’s policymaking council is the static nature of voting.  The BOJ Board has nine members, same as the Bank of England’s MPC.  There have been 26 scheduled meetings in the nearly two years since quantitative easing was launched, each lasting close to six hours.  In over 150 hours of discussion, nobody has changed their mind even amid fairly substantial changes in the information being examined.  If new truth cannot emerge from shared ideas and the passage of time, one has to question the usefulness of having a committee that meets regularly to set policy. 

Board members do acknowledge an evolution of economic circumstances and, for instance, made a number of modifications to their assessment in the latest statement.  Views about exports and industrial production were upgraded, while consumption was downgraded.  The level of core consumer price inflation was revised to 0.5% from 0.5-1.0% mentioned in the previous statement.

The next Board meeting will be on March 16-17.  Most analysts including me expect a loosening of policy to occur eventually.  A few look for the change to occur in April, coinciding with the start of fiscal 2015.  More anticipate that the Board will hold off until around midway through this fiscal year.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



Comments are closed.