Extracts from the Bank of Japan Statement on Monetary Policy
"The pick-up in Japan's economic activity has paused, mainly due to the effects of a slowdown in overseas economies and of the appreciation of the yen. As for domestic demand, business fixed investment has been on a moderate increasing trend and private consumption has remained firm. On the other hand, exports and production have remained more or less flat, due in part to the effects of the slowdown in overseas economies and of the yen's appreciation as well as of the flooding in Thailand. Improvement in business sentiment has slowed on the whole despite steady improvement in domestic demand-oriented sectors. Meanwhile, although global financial markets remain under heavy strain, financial conditions in Japan have continued to ease. The year-on-year rate of change in the CPI (all items less fresh food) is around 0 percent.
As for the outlook, Japan's economic activity will remain more or less flat for the time being. After that, the economy is expected to return to a moderate recovery path as the pace of recovery in overseas economies picks up, led by emerging and commodity-exporting economies, and reconstruction-related demand after the earthquake disaster gradually materializes. The year-on-year rate of change in the CPI is expected to remain at around 0 percent for the time being.
The Bank has repeatedly expanded the size of the Asset Purchase Program on a significant scale, and is steadily implementing the Program mainly through the purchase of financial assets. The Bank has also made it clear that it is committed to continuing the virtually zero interest rate policy until it judges that price stability is in sight on the basis of the "understanding of medium- to long-term price stability. In order for Japan's economy to overcome deflation and return to a sustainable growth path with price stability, the Bank will continue to consistently make contributions as the central bank by pursuing powerful monetary easing through the comprehensive monetary easing measures as described above, ensuring financial market stability, and providing support to strengthen the foundations for economic growth."