BoJ Stands Pat on Monetary Policy, Cuts Inflation Forecasts

The Bank of Japan kept its pledge to increase the monetary base at an annual pace of about 80 trillion yen, saying the economy continues its moderate recovery while inflation is expected to slow due to falling energy prices.

The Policy Board also decided by an 8-1 vote to purchase exchange-traded funds (ETFs) and Japan real estate investment trusts (J-REITs) so that their amounts outstanding will increase at an annual pace of about 3 trillion yen and about 90 billion yen respectively. As for CP and corporate bonds, the Bank will maintain their amounts outstanding at about 2.2 trillion yen and about 3.2 trillion yen respectively.

Excerpts from the Statement by the Bank of Japan:

Japan's economy has continued its moderate recovery as a trend. Oversees economies -- mainly advanced economies -- have been recovering, albeit with a lackluster performance still seen in part. In this situation, exports have been picking up. Business fixed investment has  been on a moderate increasing trend as corporate profits have improved. Public investment has more or less leveled off at a high level. Private consumptionas a whole has remained resilient against the backdrop of steady improvement in employment and income situation, although recovery in some areas has been sluggish. Housing investment, which continued to decline following the front-loaded increase, has recently started to bottom out. Against the backdrop of these developments in demand both at home and abroad, industrial production has been picking up, due in part to the progress in inventory adjustments. Meanwhile, financial conditions are accommodative. On the price front, the year-on-year rate of increase in the consumer price index (CPI, all items less fresh food), excluding the direct effects of the consumption tax hike, is in the range of 0.0-0,5 percent. Inflation expectations appear to be rising on the whole from a somewhat longer-term perspective.

With regard to the outlook, Japan's economy is expected to continue its moderate recovery trend. The year-on-year rate of increase in the CPI is likely to be about 0 percent for the time being, due to the effects of the decline in energy prices.

Risks to the outlook include developments in the emerging and commodity-exporting economies, the prospects regarding the debt problem and the risk of low inflation rates being protracted in Europe, and the pace of recovery in the U.S. economy.

Quantitative and qualitative monetary easing (QQE) has been exerting its intended effects, and the Bank will continue with the QQE, 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 examine both upside and downside risks to economic activity and prices, and make adjustments as appropriate.

BoJ Stands Pat on Monetary Policy, Cuts Inflation Forecasts

Bank of Japan l Rida Husna l
3/17/2015 8:36:51 AM