Bank of Japan: Same old, Same old

July 20, 2017

Japanese monetary policy, although institutionally independent, suffers from chronically rigid thinking. The latest policy review produced 1) unchanged policy settings,2) another 7-2 vote with Kiuchi and Sato objecting to the majority’s policy preference for the same reasons that they have dissented at countless prior meetings, and 3) yet another outward push in the collective projected date when the goal of sustainable 2.0% inflation might be attained — this time by a whole year to sometime after April 2019. The original target date unveiled in April 2013 was that the mission would be completed by the spring of 2015. Policy flip-flopping has acquired a pejorative connotation, but so has policymaking that doesn’t adjust to changing facts and results. In Japan’s case, the outlook for price and wage inflation has become even more subdued, officials admit, yet they stick to the same view that the recipe of a negative 0.1% overnight interest rate, a near-zero 10-year sovereign debt yield, and heavy JGB purchases of around 80 trillion yen a year for as long as it takes, according to the latest released statement. The authorities attach downside biases to both the growth and price forecasts. Strangest of all, the shared discussion at successive Board meetings — this time lasting four hours and 35 minutes — continues to have no discernible effect on the views of each of the nine individuals serving on the Board.

A new quarterly Outlook for Economic Activity and Prices was published.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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