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MNI (London)
     TOKYO (MNI) - The Bank of Japan left monetary policy unchanged Friday,
voting 7-2 vote to continue with yield curve control and the asset purchases, as
Japan's economy is expanding moderately, despite heightened downside risks.
     The BOJ board maintained the overall economic assessment, saying "Japan's
economy is expanding moderately, with a virtuous cycle from income to spending
operating," adding that the economy "is likely to continue its moderate
     However, in the wake of weaker data, the BOJ lowered its assessment of
exports and overseas economies, reflecting slowing in China and Europe.
     "Exports have shown some weakness recently," the BOJ said. The previous
view was "exports have been on an increasing trend."
     It also said, "Overseas economies have been growing moderately on the
whole, although slowdowns have been observed."
     The previous view was "Overseas economies have continued to grow firmly on
the whole." As for the outlook, the BOJ said Friday, "Although exports are
projected to show 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."
     "Industrial production has been on a moderate increasing trend," the BOJ
said. The previous view was "industrial production has been on an increasing
     Looking ahead, the BOJ board is focused on capital investment plans for
fiscal 2019, to be available in the BOJ March Tankan business sentiment survey
due out on April 1.
     Policymakers will carefully examine how they can maintain the baseline
recovery scenario at the April 24-25 meeting when they releases their
medium-term economic growth and inflation rate outlook.
     The key points from the BOJ board decision, which came after the latest
two-day policy meeting that ended Friday:
     --Under the yield curve control framework adopted in September 2016, the
BOJ will keep the target for the overnight interest rate at -0.1%.
     -- The BOJ will continue buying JGBs to stabilize the 10-year yield "around
zero percent" but it will also allow the long-term interest rate to "move upward
and downward to some extend" in line with the changes in economic growth and
     In July, 2018, the bank "strengthened" the framework, allowing a wider
trading range of +0.2% to -0.2% for the 10-year Japanese government bond yield,
double the previous, unofficial range of +0.1% to -0.1%.
     -- The BOJ continues to see risks to the outlook from the U.S. economic
policies' impact on global financial markets, the consequences of protectionist
moves, developments in emerging and commodity-exporting economies, negotiations
on UK's exit from the European Union and geopolitical risks.
     --Reflationist board members Yutaka Harada, a former government economist,
and Goushi Kataoka, a former private-sector economist, dissented again.
     Harada called the guideline for market operations "too ambiguous" while
Kataoka continued to call for additional easing. He said, "It was desirable to
strengthen monetary easing" amid heightened uncertainties regarding development
in economic activity and prices going forward.
     On forward guidance, Harada also dissented, arguing that it would be better
to adopt one that would "further clarify its relationship" with the inflation
target. Kataoka was also opposed. He repeated that it would be better to promise
additional easing in the event of a downward revision to the board's longer-term
inflation outlook.
     -- On the conduct of monetary policy, the BOJ maintained the view the bank
"intends to maintain the current extremely low levels of short- and long-term
interest rates for an extended period of time, taking into account uncertainties
regarding economic activity and prices including the effects of the consumption
tax hike scheduled to take place in October 2019."
     -- Officially, the BOJ will maintain the annual pace of its JGB purchases
at around Y80 trillion, although the pace has declined sharply as the
accumulated effects of keeping rates down with asset purchases have intensified.
The bank noted it will conduct the purchases "in a flexible manner."
     -- The scale of asset purchases, such as exchange-traded funds (ETFs),
Japan real estate investment trusts (J-REIT), commercial paper and corporate
bonds was unchanged at Y6 trillion, Y90 billion, Y2.2 trillion and Y3.2
trillion, respectively.
--MNI Tokyo Bureau; tel: +81 90-2175-0040; email:
--MNI London Bureau; tel: +44 203-586-2225; email:
MNI London Bureau | +44 203-865-3812 |