Monday, September 14, 2015

BOJ maintains stance but exports and output are now flat

    Japan's central bank maintained its monetary policy stance, as expected, but acknowledged that exports and industrial production "have recently been more of less flat" due to the slowdown in emerging economies.
    But the Bank of Japan (BOJ) still maintained that its economy was "expected to continue recovering moderately," as domestic demand and business investment was on a "moderate increasing trend as corporate profits have continued to improve markedly."
    The BOJ's description of exports and output as flat is an important shift in comparison with its statement on August 7 when it said exports and industrial output had "been picking up."
    The BOJ, which embarked on "quantitative and qualitative easing (QQE) in April 2013, also repeated its view that consumer price inflation was likely to be around zero percent for the time being due to the fall in energy prices but inflation expectations "appear to be rising on the whole."
    The BOJ's aggressive easing campaign, which involves the annual purchase of some 80 trillion yen of Japanese government bonds along with exchange-traded funds and real estate investment trusts, aims at ridding the country of some 15 years of deflation.
    But last year's fall in oil prices dealt a setback to this aim and in July the consumer price inflation rate slipped to 0.2 percent from 0.4 percent in June.
    Last month BOJ Governor Haruhiko Kuroda said the central bank could fall behind in its schedule to generate 2 percent inflation if oil prices fail to recover, and policy changes could be made if this were to affect inflation expectations and the underlying price trend.
    In April the BOJ pushed back its estimate for reaching its inflation target of 2.0 percent to the first half of fiscal 2016, which begins on April 1.
    News that Japan's Gross Domestic Product contracted by 0.3 percent in the second quarter from the first quarter further fueled market expectations that the BOJ would launch another round of easing at the end of October when it issues its semi-annual review of long-term projections.


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