Bank of Japan Policy Unchanged

April 28, 2022

The Bank of Japan continues to contrast starkly with the Fed’s rapid transition from a patient strategy to a hurry-up offense against inflation. A  four hour 54 minute deliberation over two days by the BOJ policy board ended in unchanged policy settings despite marked revisions in projected inflation and growth. The meeting unveiled a quarterly update of the bank’s Outlook for Economic Activity and Prices. Projected growth in the fiscal year that began this month was lowered to 2.9% from 3.8% predicted three months ago, while core CPI inflation (excluding fresh food but not energy) was raised 0.8 percentage points to 1.9%. However, Governor Kuroda expressed doubt that inflation when energy is also excluded will go above 1.5%. He attributed inflation to “cost-push” factors that are likely to fade, and he accordingly does not anticipate conditions emerging anytime soon for considering an exit from the current stance known as quantitative and qualitative easing with yield curve control.

Ahead of the meeting, speculation had arisen that Japan might undertake currency market intervention to stop the yen from depreciation, but Kuroda gave a mixed signal on that possibility. He favors a soft currency as good for the economy on balance but doesn’t want depreciation to snowball into a disorderly one-way bet that could depress the economy. The BOJ’s short-term interest rate has been negative 0.1% since early 2016, and a target of around zero percent for the 10-year JGB yield is being enforced by an open-ended promise to buy such assets at a yield of 0.25%.

Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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