BOJ also confirmed its guidance from October that it would not hesitate to take additional easing measures if the momentum toward achieving its price stability target were lost due to if there were significant downside risks to economic activity and prices, mainly from overseas economies.
Looking ahead, BOJ also maintained its view Japan's economy will continue on a "moderate expanding trend, as the impact of the slowdown in overseas economies on domestic demand is expected to be limited, although the economy is likely to continue to be affected by the slowdown for the time being."
Although Japan's exports are likely to remain weak for some time, BOJ still sees them on a "moderate increasing trend on the back of overseas economies growing moderately on the whole."
BOJ's statement underscores the general view that further monetary easing by major central banks is on hold for now, with the BOJ also noting domestic demand will be supported by the government's 13.2 trillion yen fiscal package that was approved by the cabinet this month.
BOJ has used a combination of negative interest rates and "yield curve control" in which its uses asset purchases to keep the yield on government bonds around zero percent, since September 2016.
Japan's headline inflation rate was steady at 0.2 percent in October and September while the economy has been picking up speed in recent quarters with gross domestic product growing 1.7 percent year-on-year in the third quarter, up from 0.9 percent in the second and 0.8 percent in the first quarter.
In its latest economic outlook from Oct. 31, BOJ lowered its forecast for growth in fiscal 2019, which began April 1, to 0.6 percent from July's forecast of 0.7 percent, the 2020 forecast to 0.7 percent from 0.9 percent, and the 2021 forecast to 1.0 percent from 1.1 percent.
BOJ also lowered its outlook for inflation, both for consumer prices excluding fresh food, and for inflation excluding the effects of the consumption tax hike.
CPI, less fresh food, is seen rising 0.7 percent in fiscal 2019, down from 1.0 percent. In fiscal 2020 inflation is seen at 1.1 percent, down from 1.3 percent, and in fiscal 2021 inflation is seen at 1.5 percent as compared with July's forecast of 1.6 percent.
The Bank of Japan issued the following press release:
1.
At the Monetary Policy Meeting (MPM) held today, the Policy Board of the Bank of Japan decided upon the following.
1) In case of a rapid increase in the yields, the Bank will purchase JGBs promptly and appropriately.
- (1) Yield curve control
The Bank decided, by a 7-2 majority vote, to set the following guideline for market
[Note 1]
The short-term policy interest rate:
The Bank will apply a negative interest rate of minus 0.1 percent to the Policy-Rate
Balances in current accounts held by financial institutions at the Bank.
The long-term interest rate:
The Bank will purchase Japanese government bonds (JGBs) so that 10-year JGB
yields will remain at around zero percent. While doing so, the yields may move upward and downward to some extent mainly depending on developments in economic activity
1 - (2) Guidelines for asset purchases
With regard to asset purchases other than JGB purchases, the Bank decided, by a unanimous vote, to set the following guidelines.
1) In case of a rapid increase in the yields, the Bank will purchase JGBs promptly and appropriately.
b) As for CP and corporate bonds, the Bank will maintain their amounts outstanding at about 2.2 trillion yen and about 3.2 trillion yen, respectively.
- Japan's economy has been on a moderate expanding trend, with a virtuous cycle from income to spending operating, although exports, production, and business sentiment have shown some weakness, mainly affected by the slowdown in overseas economies and natural disasters. Overseas economies have been growing moderately on the whole, although slowdowns have continued to be observed. In this situation, exports have continued to show some weakness, and industrial production has declined recently, due partly to the effects of natural disasters. On the other hand, with corporate profits staying at high levels on the whole, business fixed investment has continued on an increasing trend. Private consumption has been increasing moderately, albeit with fluctuations due to such effects as of the consumption tax hike, against the background of steady improvement in the employment and income situation. Housing investment has been more or less flat, and public investment has increased moderately. Meanwhile, labor market conditions have remained tight. Financial conditions are highly accommodative. On the price front, the year-on-year rate of change in the consumer price index (CPI, all items less fresh food) is at around 0.5 percent. Inflation expectations have been more or less unchanged.
- With regard to the outlook, Japan's economy is likely to continue on a moderate expanding trend, as the impact of the slowdown in overseas economies on domestic demand is expected to be limited, although the economy is likely to continue to be affected by the slowdown for the time being. Domestic demand is expected to follow an uptrend, with a virtuous cycle from income to spending being maintained in both the corporate and household sectors, mainly against the background of highly accommodative financial conditions and active government spending, despite being affected by such factors as the consumption tax hike. Although exports are projected to continue showing some weakness for the time being, they are expected to be on a moderate increasing trend on the back of overseas economies growing moderately on the whole. The year-on-year rate of change in the CPI is likely to increase gradually toward 2 percent, mainly on the back of the output gap remaining positive and medium- to long-term inflation expectations rising, despite such effects as of the decline in
[Note 2]
- Risks to the outlook include the following: the consequences of protectionist moves and their effects; developments in emerging and commodity-exporting economies such as China; developments in global adjustments in IT-related goods; developments in the United Kingdom's exit from the European Union (EU) and their effects; geopolitical risks; and developments in global financial markets under these circumstances. Downside risks concerning overseas economies seem to remain significant, and it also is necessary to pay close attention to their impact on firms' and households' sentiment in Japan.5. The Bank will continue with "Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control," 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 continue expanding the monetary base until the year-on-year rate of increase in the observed CPI (all items less fresh food) exceeds 2 percent and stays above the target in a stable manner. As for the policy rates, the Bank expects short- and long-term interest rates to remain at their present or lower levels as long as it is necessary to pay close attention to the possibility that the momentum toward achieving the price stability target will be lost. It will examine the risks considered most relevant to the conduct of monetary policy and make policy adjustments as appropriate, taking account of developments in economic activity and prices as well as financial conditions, with a view to maintaining the momentum toward achieving the price stability target. In particular, in a situation where downside risks to economic activity and prices, mainly regarding developments in overseas economies, are significant, the Bank will not hesitate to take additional easing measures if there is a greater possibility that the momentum toward achieving the price stability target will be lost. [Note 3][Note 1] Voting for the action: Mr. H. Kuroda, Mr. M. Amamiya, Mr. M. Wakatabe, Mr. Y. Funo, Mr. M. Sakurai, Ms. T. Masai, and Mr. H. Suzuki. Voting against the action: Mr. Y. Harada and Mr. G. Kataoka. Mr. Y. Harada dissented, considering that allowing the long-term yields to move upward and downward to some extent was too ambiguous as the guideline for market operations decided by the Policy Board. Mr. G. Kataoka dissented, considering that it was desirable to strengthen monetary easing by lowering the short-term policy interest rate.[Note 2] Mr. G. Kataoka dissented, considering that the possibility of the year-on-year rate of change in the CPI increasing toward 2 percent going forward was low at this point.[Note 3] In order to achieve the price stability target of 2 percent at the earliest possible time, Mr. G. Kataoka dissented, considering that further coordination of fiscal and monetary policy was necessary, and that it was appropriate for the Bank to revise the forward guidance for the policy rates to make it a powerful one that specifically relates to the price stability target."www.CentralBankNews.info
0 comments:
Post a Comment