Bank of Japan Leaves Monetary Stimulus Unchanged


At its April 8th, 2014 meeting, the Bank of Japan maintained its commitment to increase base money at an annual pace of 60 trillion to 70 trillion yen, as widely expected, despite a sales tax hike, saying the economy is recovering moderately.

The central bank also said it 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; it 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 respectivel and it will maintain CP and corporate bonds at about 2.2 trillion yen and about 3.2 trillion yen respectively.  

Excerpt from the statement by the Bank of Japan:

Japan's economy has continued to recover moderately as a trend, albeit with some fluctuations due to the consumption tax hike. Overseas economies -- mainly advanced economies -- are starting to recover, although a lackluster performance is still seen in part. 

Exports have recently leveled off more or less. The pick-up in business fixed investment has become increasingly evident as corporate profits have improved. Public investment has continued to increase. Private consumption and housing investment have remained resilient as a trend with improvement in the employment and income situation, albeit with some fluctuations due to the consumption tax hike. Reflecting these developments in demand both at home and abroad, industrial production has been on a moderate increasing trend. 

Business sentiment has continued to improve, although some cautiousness about the outlook has been observed. Meanwhile, financial conditions are accommodative. On the price front, the year-on-year rate of increase in the consumer price index (CPI, all items less fresh food) is around 1¼ percent. Inflation expectations appear to be rising on the whole. 

With regard to the outlook, Japan's economy is expected to continue a moderate recovery as a trend, while it will be affected by the subsequent decline in demand following the front-loaded increase prior to the consumption tax hike. The year-on-year rate of increase in the CPI, excluding the direct effects of the consumption tax hike, is likely to be around 1¼ percent for some time.  

Risks to the outlook include developments in the emerging and commodity-exporting economies, the prospects for the European debt problem, and the pace of recovery in the U.S. economy.

Bank of Japan Leaves Monetary Stimulus Unchanged


Bank of Japan | Joana Taborda | joana.taborda@tradingeconomics.com
4/8/2014 8:41:30 AM