Disappointing Bank of Japan Response
July 29, 2016
Market participants were expecting a more forceful Bank of Japan stimulus than was done. The Bank of Japan’s three-tier interest rate structure wasn’t changed. The macro add-on rate is zero. The Basic Balance rate is 0.10%. The BOJ policy rate is negative 0.10%. The program to increase bond purchases at a rate of 80 trillion yen per year was not changed, not the goal of expanding the monetary base by 80 trillion yen a year. Limits were likewise not changed of 3.2 trillion corporate bond purchases, 2.2 trillion of commercial paper and 90 billion yen of J-Reits. The one significant change, according to a released statement, is that purchases of ETFs were lifted to 6 trillion yen from 3.3 trillion yen.
A separate document updated the central bank’s assessment. Monetary officials continue to be more optimistic than most private Japan watchers in the likelihood of core inflation, now at -0.5%, rising to near the 2% target sometime in fiscal 2017. New forecasts were released. The table below shows the evolution of the baseline forecasts of growth and core inflation through successive quarterly updates. The changes from the April forecast mainly reflect the government’s decision last month to move back the timing of the next consumption tax hike to April 2019 from October 2016.
Copyright 2016, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
| GDP, %
July 2016 |
Fiscal 2016
1.0% |
Fiscal 2017
1.3% |
Fiscal 2018
1.0% |
| April 2016 | 1.2% | 0.1% | 1.0% |
| January 2016 | 1.5% | 0.3% | |
| October 2015 | 1.4% | 0.3% | |
| July 2015 | 1.5% | 0.2% | |
| April 2015 | 1.5% | 0.2% | |
| January 2015 | 1.6% |
| Core CPI
July 2016 |
Fiscal 2016
0.1% |
Fiscal 2017
1.7% |
Fiscal 2018
1.9% |
| April 2016 | 0.5% | 1.7% | 1.9% |
| January 2016 | 0.8% | 1.8% | |
| October 2015 | 1.4% | 1.8% | |
| July 2015 | 1.9% | 1.8% | |
| April 2015 | 2.0% | 1,9% | |
| January 2015 | 2.2% |
Tags: Bank of Japan
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