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Tuesday, December 20, 2016
The Bank of Japan has left monetary policy unchanged
The Bank of Japan’s December monetary policy has just concluded, and they’ve done nothing.
Its so-called “quantitative and qualitative monetary easing (QQE) with yield curve control” was left unchanged by a majority vote of seven to two.
The bank pledged to purchase Japanese government bonds (JGBs) at an annual pace of around 80 trillion yen in order to maintain a 10-year JGB yield of around 0%.
Interest rates were also left unchanged at -0.1%.
As it did in its previous meeting, the BOJ said that it will maintain this policy as long as it is necessary to achieve and maintain the bank’s 2% price stability target in a stable manner.
It also said that it would continue to expand the nation’s monetary base at its current pace of around 80 trillion yen per annum until it core consumer price inflation exceeds 2% and stay there in a stable manner.
While it made no change to policy settings, it did upgrade its assessment of the economy, noting that a “moderate recovery trend had continued” while exports “picked up”.
It expects the moderate recovery to turn into a modest expansion in the period ahead, saying that domestic demand was likely to follow an uptrend with “a virtuous cycle from income to spending being maintained in both the corporate and household sectors”.
On exports, it said that they were expected to follow a “moderate increasing trend” on the back of an “improvement in overseas economies”.
Towards inflation, still of most importance when it comes to outlook for policy settings, the BOJ said that the “year-on-year rate of change in the CPI is likely to be slightly negative or about zero percent for the time being” due to lower energy prices.
“As the output gap improves and medium to long-term inflation expectations rise, it is expected to increase towards 2%,”, it said.
There has been little reaction to the data release, hardly as a surprise as it was predicted by all 39 economists surveyed by Bloomberg.
The USD/JPY is up around 30 pips from when it was announced while the TOPIX in Tokyo has trimmed its decline to 0.1%.
The 10-year yield for Japanese government bonds sits at 0.06%.
USD/JPY 5-Minute Chart
The full policy statement from the BOJ can be accessed here.