Bank of Japan Stance Left Unchanged

March 15, 2019

The latest Bank of Japan policy review as expected left targets for the overnight interest rate (-0.1%), the 10-year JGB yield (around 0%), and other quantitative elements of that central bank’s easy stance unchanged. In a released statement, Board members did downgrade their views of global growth and Japanese exports and industrial production, observing recent weakness in each instance. Forward guidance wasn’t changed:

The Bank will continue with “Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control,” aiming to achieve the price stability target of 2 percent, as long as it is necessary for maintaining that target in a stable manner. It will continue expanding the monetary base until the year-on-year rate of increase in the observed CPI (all items less fresh food) exceeds 2 percent and stays above the target in a stable manner. As for policy rates, the Bank intends to maintain the current extremely low levels of short- and long-term interest rates for an extended period of time, taking into account uncertainties regarding economic activity and prices including the effects of the consumption tax hike scheduled to take place in October 2019.

As before, two of the nine board members, Harada and Kataoka, dissented in favor of greater monetary stimulus, but Governor Kuroda in the subsequent press conference rejected such a need, noting that domestic demand continues to rise and insisting that the likeliest future scenario is one in which Japan’s economy continues its moderate expansionary trend. By the same token, he defended the bank’s negative short-term interest rate, which has drawn criticism from business and some government officials, saying that the existing policy mustn’t be ended before 2% inflation has been achieved and reiterating that the mission is taking longer than had been foreseen but that it will succeed eventually.

Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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