BoJ Leaves Policy Unchanged, Slashes GDP Forecast


The Bank of Japan kept its pledge to increase the monetary base at an annual pace of about 80 trillion yen at its July 2015 meeting, saying the economy continues its moderate recovery while inflation is expected to slow due to falling energy prices.

Policymakers also said that for fiscal year of 2015, the GDP growth projection will likely be lower than their earlier forecasts made in April 2015.

The Policy Board also decided by an 8-1 vote to 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 3 trillion yen and about 90 billion yen respectively. 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.

Excerpts from the Statement by the Bank of Japan:

Japan's economy has continued its moderate recovery. Oversees economies -- mainly advanced economies -- have been recovering, albeit with a lackluster performance still seen in part. In this situation, exports have been picking up albeit with some fluctuations. As corporate profits have improved and business sentiment has generally stayed at a favorable level, business fixed investment has been on a moderate increasing trend. Against the background of steady improvement in the employment and income situation, private consumption has been resilient against and housing investment has started to pick up. Meanwhile, public investment has entered a moderate declining trend, although it remains at a high level. 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 about 0 percent. Inflation expectations appear to be rising on the whole from somewhat longer-term perspective.

With regard to the outlook, Japan's economy is expected to continue its moderate recovery trend. The year-on-year rate of increase in the CPI is likely to be about 0 percent for the time being, due to the effects of the decline in energy prices.

Compared with the forecasts presented in the April 2015 Outlook for Economic Activity and Prices, the growth rate will likely be somewhat lower for fiscal 2015, but will likely be more or less unchanged for fiscal 2016 and 2017. The year-on-year rate of increase in the CPI will likely be broadly in line with the April forecast.

Risks to the outlook include developments in the emerging and commodity-exporting economies, the prospects regarding the debt problem and the risk of low inflation rates being protracted in Europe, and the pace of recovery in the U.S. economy.

Quantitative and qualitative monetary easing (QQE) has been exerting its intended effects, and the Bank will continue with the QQE, 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 examine both upside and downside risks to economic activity and prices, and make adjustments as appropriate.

BoJ Leaves Policy Unchanged, Slashes GDP Forecast


Bank of Japan l Rida Husna l rida@tradingeconomics.com
7/15/2015 5:10:35 AM