Bank of Japan

March 15, 2016

The nine policy board members talked for five hours forty four minutes of talks over two days and in the end decided not to change the quantitative monetary stimulus settings nor the -0.1% policy interest rate.  Quantitative stimulus was introduced in April 2013 and modified in October 2014.  A three-tiered rate structure was adopted after the prior board meeting on January 29, consisting of a +0.1% basic bank rate, a zero percent macro add-on rate, and a -0.10% policy rate to be applied to the outstanding balance of each financial institution’s current account at the BOJ in excess of the amounts outstanding accumulated under quantitative and qualitative easing plus the amounts outstanding of required reserves and the BOJ’s provision of credit through the Loan Support Program and the Funds-Supplying Operation.

Officials released a new statement today revealing a 7-2 vote to keep the interest rate structure.  When approved initially on January 29, the board had split 5-4 with four members dissenting from the introduction of a negative interest rate.  The statement is more guarded about the economy, with downgrades to exports and housing, whose pick-ups have paused, and note is also mentioned that inflation expectations have recently moved downward.  The statement also tweaks some operational details regarding the calibration of the macro add-on balance that is subject to a zero interest rate.

The Board used to meet at least once a month plus twice in April and October but this year switched to a schedule of eight meetings around the year as the FOMC observes.  This week’s meeting was only the second of 2016.  The third meeting is scheduled for April 27-28.  Many analysts think additional stimulus will be unveiled then.  The government is also exploring the possibility of postponing a planned consumption tax hike in April 2017.

Copyright 2016, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission. 



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