Bank of Japan Keeps Monetary Policy Steady in June

At the Monetary Policy Meeting held June 11, the Policy Board of the Bank of Japan raised the assessment of the economy and 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 (JGBs) so that their amount outstanding will increase at an annual pace of about 50 trillion yen, and the average remaining maturity of the Bank's JGB purchases will be about seven years. The Bank will 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 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; thereafter, it will maintain those amounts outstanding. 

Japan's economy has been picking up as exports have started rebounding. 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 remained resilient, assisted by the improvement in consumer sentiment. On the price front, the year-on-year rate of change in the consumer price index (CPI, all items less fresh food) has been negative, due to the reversal of the previous year's movements in energy-related and durable consumer goods.

With regard to the outlook, Japan's economy is expected to return to a moderate recovery path, mainly against the background that domestic demand increases its resilience due to the effects of monetary easing as well as various economic measures, and that growth rates of overseas economies gradually pick up, albeit moderately. The year-on-year rate of change in the CPI is likely to gradually turn positive. 

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.

Bank of Japan Keeps Monetary Policy Steady in June

Bank of Japan | Nuno Fontes |
6/11/2013 8:51:27 AM