BoJ Holds Monetary Policy Steady; Trims Inflation Outlook

The Bank of Japan left its key short-term interest rate unchanged at -0.1 percent at its October 2017 meeting, as expected. Policymakers also kept its 10-year government bond yield target around zero percent but trimmed inflation forecast to 0.8 percent for fiscal 2017 from 1.1 percent, as firms' wage and price-setting stance has remained cautious.
Bank of Japan | Rida Husna | 10/31/2017 2:15:18 PM
With regard to the amount of JGBs to be purchased, the Bank will conduct buying at more or less the current pace -- an annual pace of increase of about 80 trillion yen.

The BoJ also determined by a 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 paces of about JPY 6.0 trillion and about JPY 90 billion, 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.  

Meanwhile in a quarterly review of the central bank's forecasts, the BoJ lowered its core CPI forecast for fiscal 2017 to 0.8 percent from the previous estimate of 1.1 percent, mainly due to the effects of a reduction in changes for mobile phones. At the same time, firms' wage and price-setting stance has remained cautious despite the steady tightening of labor market and the high levels of corporate profits. Meanwhile the timing for inflation to reach 2 percent will likely be around fiscal 2019. Regarding the GDP, the central bank said the projected growth rates are more or less unchanged from an earlier projection.

Excerpts from the Outlook for Economic Activity and Prices:

Japan's economy is likely to continue its moderate expansion. Through fiscal 2018, domestic demand is likely to follow an uptrend, with a virtuous cycle from income to spending being maintained in both corporate and household sectors on the back of highly accommodative financial conditions and fiscal spending through the government's large stimulus measures. Business fixed investment is likely to continue increasing moderately, supported by acccommodative financial conditions, heightened growth expectations and increases in Olympic Games-related investment, as well as in labor-saving investment to address the labor shortage. Private consumption is also expected to follow a moderate increasing trend as emplyment and income situation continues to improve. Public investment is projected to increase in fiscal 2017, due to positive effects resulting from  a set of stimulus measures. At the same time, exports are expected to continue their moderate increasing trend on the back of such growth in overseas economies.

For fiscal 2018, the economy is expected to expand by 1.4 percent, unchanged from an earlier projection. Core CPI for the year is projected to   rise by 1.4 percent, down slightly from an earlier forecast of 1.5 percent. 

BoJ Holds Monetary Policy Steady; Trims Inflation Outlook