Summary:
- BoJ meeting largely a non-event. No major policy changes
- Interest rates remain at -0.10%
- BoJ’s QQE remains at 80 trillion yen
- BoJ upgrades GDP growth by 0.1 percentage point
- BoJ maintains subdued inflation rate
The Bank of Japan’s monetary policy meeting was held earlier today. As widely expected, the central bank left interest rates unchanged at -0.10% and maintained its current pace of easing at 80 trillion yen.
The BoJ’s meeting follows that of the Federal Reserve Bank which hiked the short-term interest rates.
The policymaker board at the BoJ voted unanimously to keep the target yield for the 10-year Japanese Government Bonds (JGB’s) at or around zero. The central bank reiterated its commitment to maintaining the easing bias which was aimed at lifting inflation.
The central bank raised the economic assessment at the meeting as well. The GDP growth forecasts were upgraded to 1.6% from 1.5% for the fiscal year 2017 – 18. The central bank, however, lowered the core CPI forecasts to 1.4%, from the current 1.5% in the same period.
“Private consumption has increased resilience against a background of steady improvement in the employment and income situation,†the BOJ said in a statement.
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However, inflation in Japan continues to remain weak.
The central bank switched to controlling both the short and long-term yields on bonds or interest rates. This new policy mechanism was revamped last September with the move seen by many as the central bank’s commitment to lifting inflation.
Ahead of the BoJ’s meeting, the markets were expecting the central bank to give more clarity on the possible adjustments to the monetary policy program. Talks about exiting the stimulus program have been doing rounds for a couple of months already.
Despite maintaining the easing at a pace of 80 trillion yen, the actual pace of bond purchases by the BoJ has significantly fallen. By some estimates, the BoJ’s bond purchases are expected to be around 60 billion.
