Japan Monetary Policy


Japan: Bank of Japan makes no changes to stimulus program

July 15, 2015

At its 14–15 July monetary policy meeting, the Bank of Japan (BoJ) voted 8–1 to maintain its monetary policy stance unchanged. The Bank also decided to continue implementing money market operations so that the monetary base—its main monetary policy instrument—will increase at an annual pace of JPY 80 trillion (approximately USD 646 billion). The decision, which was in line with market expectations, is aimed at meeting the Central Bank’s inflation target of 2.0% by the first half of FY 2016.

In its July assessment of the economy, the BoJ restated that the economy has continued to recover moderately, spurring exports and industrial production. Rising corporate profits, improving business sentiment and steady gains in employment and wages have strengthened domestic demand. Moreover, the economy benefited from the ongoing recovery in the global economy, particularly in advanced economies.

Regarding price developments, while the Bank stressed that medium- to long-term inflation expectations appear to be rising on the whole from a somewhat longer-term perspective, it stated that inflation is likely to remain close to 0% in the near term due to the energy price decline.

The monetary base expanded 34.2% in June and reached JPY 313 trillion, which was up from the JPY 304 billion tallied in the previous month. The monetary base has expanded by an accumulative 132.4% since the Bank unveiled its quantitative and qualitative easing program in April 2013.

All of the FocusEconomics Consensus Forecast panelists expect the collateralized overnight call rate to remain unchanged at between 0.0% and 0.1% in 2015, 2016 and 2017. Our panelists expect the yen to trade at 126.6 per USD by the end of 2015. For 2016, the panel projects that the yen will weaken further to 130.8 per USD.

Author: Ricard Torné, Lead Economist

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Japan Monetary Policy Chart

Japan Monetary Policy June 2015 0

Note: Monetary base in JPY trillion and 10-year bond yields %.
Source: Bank of Japan (BoJ) and Thomson Reuters.

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