Thursday, November 17, 2011

Bank of Japan Keeps Monetary Policy Settings Unchanged

The Bank of Japan held its interest rate steady at 0-0.10% and made no changes to its 55 trillion yen quantitative easing program.  The Bank said: "Japan's economic activity has continued picking up, but at a more moderate pace mainly due to effects of a slowdown in overseas economies.  As for domestic demand, business fixed investment has been increasing moderately and private consumption has remained firm.  On the other hand, exports and production have continued to increase, due in part to the restocking of inventories abroad that had declined after the earthquake, but at a more moderate pace mainly reflecting the effects of the slowdown in overseas economies."

At its October meeting the Bank of Japan expanded its asset purchase program by another 5 trillion yen to 55 trillion yen, and previously announced additions to its quantitative easing program during its August meeting.  The Bank had previously changed its asset purchase program in March this year, when it added a further 5 trillion yen to its target.  Japan reported annual headline consumer price inflation of 0% in September, down from 0.2% in both August, July and June, and 0.3% in both May and April.  

The Bank has previously forecast real GDP growth of 0.2-0.6% in fiscal 2011, and 2.5-3.0% in fiscal 2012.  Meanwhile, nominal GDP growth in Japan was recorded at -0.5% in June and -0.9% in March, placing it at -1% in both quarters on an annual basis.  The Japanese Yen (JPY) has gained around 6% against the US dollar so far this year; the USDJPY exchange rate last traded around 76.98

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