Monetary Policy Statement
1. At the Monetary Policy Meeting held today, the Policy Board of the Bank of Japan decided, by a unanimous vote, to enhance monetary easing by increasing the total size of the Asset Purchase Program by about 10 trillion yen from about 40 trillion yen to about 50 trillion yen.
2. The Policy Board also decided, by a unanimous vote,3 to set the following guideline for money market operations for the intermeeting period:
The Bank of Japan will encourage the uncollateralized overnight call rate to remain at around 0 to 0.1 percent.
3. Japan's economic activity has been picking up steadily with an easing of the supply-side constraints caused by the Great East Japan Earthquake. As for the outlook, Japan's economy is expected to return to a moderate recovery path with production regaining traction, backed by an increase in exports and a rise in demand for restoring capital stock.
4. However, the above economic outlook entails high uncertainty and recent developments call for closer attention to downside risks. With regard to overseas economies, in the United States, concern over fiscal consolidation has not dissipated in financial markets even after the settlement of the debt ceiling problem and views on the economic outlook have recently become more cautious. In general, global financial markets still face strain from the sovereign debt problem in peripheral European countries. As for emerging and commodity-exporting economies, there remains a high degree of uncertainty about whether price stability and economic growth can be realized at the same time. There is a possibility that these developments in overseas economies and the ensuing fluctuations in the foreign exchange and financial markets may have adverse effects on business sentiment, and consequently on economic activity in Japan. Meanwhile, regarding the outlook for prices, the year-on-year rate of change in the CPI is likely to be revised downward with the base-year change scheduled this month. Apparently it will still take some time to achieve price stability.
5. After considering the recent developments in economic activity and prices as described above, the Bank deemed it necessary to further enhance monetary easing, thereby ensuring a successful transition from the recovery phase following the earthquake disaster to a sustainable growth path with price stability.
6. Japan's economy, which has confronted the longstanding challenge of raising its growth potential amid a rapidly aging population, now faces the additional new challenge of restoration and rebuilding in the wake of the earthquake disaster. To establish a new foundation of economic development, various concerned parties both in the private and government sectors must make vigorous efforts. The Bank will continue to consistently make contributions as the central bank through the three-pronged approach of pursuing powerful monetary easing consisting of comprehensive monetary easing, ensuring financial market stability, and providing support to strengthen the foundations for economic growth.