Japan Monetary Policy

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Japan: Bank of Japan stands pat on monetary policy in May

May 22, 2015

At its 21–22 May 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 648 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 FY2016.

In its May assessment of the economy, the BoJ restated that the economy has continued its moderate recovery trend. The improvement in the global economy, particularly in advanced economies, has led exports to pick up in recent months, while rising corporate profits provided a boost to investment. Moreover, a better income situation and rising employment are supporting growth in private consumption.

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 affirmed that inflation is likely to remain close to 0% in the near term due to the energy price decline.

The monetary base expanded 35.2% in April and reached JPY 300 trillion, which was up from the JPY 282 billion tallied in March. The monetary base has expanded by an accumulative 122.9% 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 125.3 per USD by the end of 2015. For 2016, the panel projects that the yen will weaken further to 130.2 per USD.


Author: Ricard Torné, Head of Economic Research

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Japan Monetary Policy Chart


Japan Monetary Policy April 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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