Bank of Japan Maintains Quantitative Easing Program; Rates Unchanged


At the Monetary Policy Meeting held in May 22nd, the Policy Board of the Bank of Japan decided to maintain the quantitative and qualitative monetary easing policy introduced previously. The monetary base will continue to increase at an annual pace of about 60-70 trillion yen.

The Bank will purchase Japanese government bonds so that their amount outstanding will increase at an annual pace of about 50 trillion yen, and that the average remaining maturity of the Bank's JGB purchases will be about seven years. The Bank will purchase exchange-traded funds and Japan real estate investment trusts so that their amounts outstanding will increase at an annual pace of about 1 trillion yen and about 30 billion yen respectively. As for CP and corporate bonds, the Bank will continue with those asset purchases until their amounts outstanding reach 2.2 trillion yen and 3.2 trillion yen respectively by end-2013.

Japan's economy has started picking up. Exports have stopped decreasing as overseas economies have been moving out of the deceleration phase that had continued since last year and are gradually heading toward a pick-up. Business fixed investment continues to show resilience in non-manufacturing and appears to have stopped weakening on the whole. Public investment has continued to increase, and housing investment has generally been picking up. Private consumption has seen increased resilience, assisted by the improvement in consumer sentiment. On the price front, the year-on-year rate of change in the consumer price index has been negative, due to the reversal of the previous year's movements in energy-related and durable consumer goods. Some indicators suggest a rise in inflation expectations.

The Bank will continue with quantitative and qualitative monetary easing, 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.

Such conduct of monetary policy will support the positive movements in economic activity and financial markets, contribute to a rise in inflation expectations, and lead Japan's economy to overcome deflation that has lasted for nearly 15 years.

Bank of Japan | Nuno Fontes | nuno@tradingeconomics.com
5/22/2013 8:48:29 AM