Japan Monetary Policy


Bank of Japan maintains monetary policy unchanged in March

At its 10-11 March monetary policy meeting, the Bank of Japan (BoJ) decided to keep its stance on monetary policy 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 580 and 675 billion). The decision, which was in line with market expectations, is aimed at achieving the inflation target of 2.0%. The Bank restated that the economy, “has continued to recover moderately,” and that, “a front-loaded increase in demand prior to the consumption tax hike has recently been observed.” The Bank reaffirmed that the main risks to its outlook are the pace of recovery in the United States, European debt sustainability, and uncertainty in emerging markets. While the Bank's accompanying statement was broadly unchanged, it slightly downgraded its outlook for exports, changing its wording from, “exports have generally been picking up,” to shipments, “have recently leveled off more or less.” In terms of price developments, the Bank stated that inflation expectations, “appear to be rising as a whole.” The next monetary policy meeting is scheduled for 7-8 April. All of the FocusEconomics Consensus Forecasts panelists expect the collateralized overnight call rate to remain unchanged at between 0.0% and 0.1% in 2014 and 2015. FocusEconomics Consensus Forecast panelists expect the yen to trade at 109.9 per USD by the end of this year. For 2015, the panel projects the yen to weaken further to 113.6 per USD.

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