Wednesday, November 20, 2013

Japan keeps QE target, economy "recovering moderately"

    Japan's central bank maintained its target for asset purchases, as widely expected, and largely repeated its description of the country's economic recovery while voicing more confidence about the global economy.
    "Japan's economy has been recovering moderately. Overseas economies as a whole are picking up moderately, although a lackluster performance is partly seen," said the Bank of Japan (BOJ), which embarked on an aggressive easing campaign in April to rid the country of some 15 years of deflation.
    Last month the BOJ said Japan's economy was "recovering moderately," and that "overseas economies as a whole are gradually heading toward a pick-up."
    The main difference between this month's statement and last month is the BOJ's description of overseas economies, reflecting the slow, but steady strengthening of growth in advanced economies.
    The BOJ maintained its target of expanding the country's monetary base by an annual 60-70 trillion yen along with increasing its purchases of Japanese government bonds so the outstanding amount rises by an annual pace of some 50 trillion yen. The BOJ is also buying exchange-traded funds and Japanese real estate investment trust along with commercial paper and corporate bonds.
    The BOJ repeated that Japan's exports were picking up, along with higher business fixed investment due to stronger corporate profits. Public investment and housing investment is also rising while private consumption has remained resilient.
    "Reflecting these developments in demand both at home and abroad, industrial production has been increasing moderately," the BOJ said, adding that "Japan's economy is expected to continue a moderate recovery," with the annual rise in consumer price inflation likely to rise gradually.
    The BOJ also repeated that it would continue with its "quantitative and qualitative monetary easing" in order to reach the price stability target of 2.0 percent.
    Japan's inflation rate rose further to 1.0 percent in September, the fourth month in a row with rising consumer prices following 12 straight months of deflation.
     The country's Gross Domestic Product expanded by only 0.5 percent in the third quarter from the second but compared with the third quarter of 2012, the economy grew by 2.7 percent, up from an annual rate of 1.1 percent in the second quarter and 0.3 percent in the first.
     Japan's yen currency started weakening in October last year when it became clear that Prime Minister Shinzo Abe was likely to win the general election in December.
    From October 1, 2012 the yen tumbled almost 25 percent to a low of 103.48 yen against the U.S. dollar in late May. But since then it has strengthened slightly, quoted at 100.38 to the dollar earlier today.


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