Japan Monetary Policy


Japan: Bank of Japan leaves monetary policy unchanged in May

May 21, 2014

At its 20–21 May monetary policy meeting, the Bank of Japan (BoJ) decided to maintain 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, will increase at an annual pace of between JPY 60 and 70 trillion (approximately USD 592 and 692 billion). The decision, which was in line with market expectations, is aimed at achieving the Central Bank’s inflation target of 2.0%.

The Bank restated that the economy, “has continued to recover moderately as a trend, although the subsequent decline in demand following the front-loaded increase prior to the consumption tax hike has been observed.” In addition, the Bank noted that, “exports have recently leveled off more or less,” while investment has increased slightly on the back of improving corporate profits. 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. In terms of price developments, the BoJ stated that, “inflation expectations appear to be rising as a whole.” The next monetary policy meeting is scheduled for 12 June.

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 108.7 per USD by the end of this year. For 2015, the panel projects the yen to weaken further to 112.3 per USD.

Author: Ricard Torné, Lead Economist

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