Exclusive interviews with leading policymakers that convey the true policy message that impacts markets.
Reporting on key macro data at the time of release.
Real-time insight on key fixed income and fx markets.
- Emerging MarketsEmerging Markets
Real-time insight of emerging markets in CEMEA, Asia and LatAm region
- MNI ResearchMNI Research
Actionable insight on monetary policy, balance sheet and inflation with focus on global issuance. Analysis on key political risk impacting the global markets.
- About Us
TOKYO (MNI) - The Bank of Japan board decided Thursday in an 8-to-1 vote to
maintain its current monetary easing stance under the yield curve control
framework it adopted in September last year.
No change in monetary policy was widely expected. The BOJ believes large
monetary stimulus is still needed to guide below 1% inflation toward its 2%
price stability target.
The BOJ board also maintained its overall assessment that the economy is
expected to stay on a modest recovery trend, led by a pickup in exports, factory
output and business investment.
The BOJ slightly upgraded its view on consumer spending, which it now sees
as "increasing moderately, albeit with fluctuations" instead of "increasing its
Despite the slow start to consumer spending in the October-December
quarter, BOJ officials believe consumption will rebound in Q4 GDP data after a
slump in the previous three months caused by bad weather. They note improving
employment and income conditions.
The BOJ also upgraded its assessment of business investment to "increasing"
from "increasing moderately," following a sharply revised up capex in Q3 GDP
data and solid investment plans seen in the BOJ's quarterly Tankan survey for
But the BOJ downgraded its view on public investment, which is "more of
less flat" while keeping its high levels. It was "increasing" earlier but the
effects of last fiscal year's supplementary budget have faded.
The board will review its medium-term growth and inflation projections
through fiscal 2019 to March 2020 at its Jan. 22-23 policy meeting.
The year-on-year rate of change in the core CPI (excluding fresh food) has
been in a range of 0.5% to 1.0%, the bank noted.
The latest data showed that the national average core CPI rose 0.8% on year
in October, marking the 10th straight year-on-year rise after rising 0.7% in
The BOJ maintained its outlook that the inflation rate will rise toward 2%.
Under the yield curve control framework, the BOJ is seeking to stabilize
the 10-year government bond yield, the benchmark for long-term borrowing costs,
at around zero percent and keep the overnight interest rate at -0.1%.
Board member Goushi Kataoka, who joined the board in July, dissented for
the third straight meeting, although he didn't propose any specific policy
Instead, Kataoka's comments were included in footnotes in the bank's policy
statement issued after the board's two-day meeting.
"Taking account of risk factors such as the consumption tax hike [planned
in October 2019] and a possible economic downturn in the United States, it was
desirable to achieve the price stability target in fiscal 2018, and that it was
appropriate for the BOJ to purchase JGBs so that yields on JGBs with maturities
of 10 year and lower would be broadly lowered," Kataoka said.
At the BOJ's previous policy meeting in October, Kataoka said that in order
to lower longer-term interest rates, it was appropriate for the BOJ to buy
Japanese government bonds so that the 15-year JGB yield would remain below 0.2%.
Kataoka was also oppose to the board's majority view that the annual
inflation rate will continue rising toward 2%, saying the possibility was "low
at this point."
The BOJ's asset purchases, which are not the main policy target any longer,
will be maintained at the current pace. The outstanding amount of its JGB
holdings will increase about Y80 trillion annually, but the pace has slowed in
light of the recent drop in yields.
The annual pace of purchases of other assets will also be maintained at Y6
trillion for exchange-traded funds (ETFs), Y90 billion for Japan real estate
investment trusts (J-REIT), Y2.2 trillion for commercial paper and Y3.2 trillion
for corporate bonds.
The BOJ also reiterated its inflation-overshooting commitment, under which
it will continue monetary easing until inflation is firmly anchored around 2%,
even if price gains overshoot that level for a time.
The BOJ repeated it would 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
The board left its near-term assessment of inflation conditions unchanged
from the previous meeting on Oct. 30-31, repeating, "Inflation expectations have
remained in a weakening phase."
In the December Tankan survey, companies on average revised up their
expectations for the consumer price index in a year's time from the previous
Tankan survey, but left their inflation outlook for three and five years ahead
unchanged from September.
Firms on average expect the annual consumer inflation rate to stand at 0.8%
a year from now, up from the 0.7% projected in September. It was the first rise
in expectations since June, when the near-term price outlook was revised up to
0.8% from 0.7% in March.
But BOJ economists are more focused on inflation expectations three and
five years ahead in assessing inflation trends. Firms' inflation forecasts for
three and five years ahead were unchanged at 1.1% each in December.
--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: email@example.com