Extracts from the Statement on Monetary Policy
Overseas economies have moved somewhat deeper into a deceleration phase. In global financial markets, while investors' risk aversion on the back of the European debt problem has abated somewhat, particular attention should be given to developments in these markets.
Japan's economy registered relatively high growth in the first half of 2012, supported by the firmness in domestic demand. Nonetheless, the pick-up in economic activity has come to a pause, reflecting the aforementioned developments in overseas economies. The year-on-year rate of change in the CPI (all items less fresh food) is around 0 percent, while the earlier fall in crude oil prices has been exerting downward pressure. Against the backdrop of these developments, economic activity is expected to level off more or less and the year-on-year rate of change in the CPI to remain at around 0 percent for the time being.
Based on these economic and price developments, the Bank of Japan judged it appropriate to expand the total size of the Program substantially by about 10 trillion yen and take the aforementioned measure to ensure the steady implementation of asset purchases. These measures in pursuit of powerful monetary easing will make financial conditions for such economic entities as firms and households even more accommodative by further encouraging a decline in longer-term market interest rates and a reduction in risk premiums. The Bank expects that, together with the cumulative effects of earlier policy measures, today's decision to enhance monetary easing will ensure the return of Japan's economy to a sustainable growth path with price stability.