Japan Monetary Policy


Bank of Japan keeps monetary policy steady

At its 31 October monetary policy meeting, the Bank of Japan (BoJ) decided to keep the monetary policy rate unchanged. The Bank also unanimously decided to continue implementing money market operations so that the monetary base-its main policy instrument-would increase at an annual pace of between JPY 60 and 70 trillion (approximately USD 608 and 710 billion). This decision was in line with market expectations.

In its October Outlook for Economic Activity and Prices, the Central Bank reiterated that the economy is "recovering moderately" and is expected to continue to do so, given that external demand is expected to increase-thereby supporting domestic growth-and despite the planned sales-tax hikes scheduled for April 2014. The BoJ underlined five potential risks to the Bank's outlook projection: uncertainty regarding developments in overseas economies; households' employment and income situations; spillovers stemming from the consumption tax hike; firms' and households' medium- to long-term growth expectations; and fiscal sustainability.

In terms of price developments, the Bank stated that CPI, "is expected to follow a rising trend, reflecting factors such as the improvement in the aggregate supply and demand balance."

All of the FocusEconomics Consensus Forecasts panelists expect the collateralized overnight call rate to remain unchanged at between 0.0% and 0.1% both this year and next.

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Japan Monetary Policy Chart

Japan Monetary Policy October 2013

Note: Collateralized overnight call rate in %.
Source: Bank of Japan (BoJ).

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