The Bank of Japan (BOJ), which embarked on Quantitative and Qualitative Easing (QQE) in April 2013 and expanded the target by 10-20 trillion yen in October last year, also repeated that it will continue with QQE with the aim of reaching its target of 2 percent inflation.
Last month the BOJ once again pushed back its expectation for when inflation will reach its target to the second half of fiscal 2016 from the first half of fiscal 2016, which begins April 1.
The BOJ and the government's efforts to boost economic growth and inflation has been dealt a setback by the fall in oil prices and the slowdown in China, with the economy falling into its fourth recession in five years and inflation hitting zero percent in September.
In the third quarter of this year Japan's Gross Domestic Product contracted by 0.2 percent from the second quarter, the same result as in the second quarter. On an annual basis the economy expanded by 1.0 percent, the same rate as in the second quarter.
In last month's semi-annual economic outlook, the BOJ cut its forecast for economic growth in the current 2015 fiscal year to an average of 1.2 percent and to 1.4 percent for fiscal 2016, with growth in fiscal 2017 then expected to fall to only 0.3 percent as consumption is once again is likely to be hit by a planned increase in sales tax on April 1, 2017.
The forecast for inflation in the current fiscal year was cut to 0.1 percent and to 1.4 percent for fiscal 2016.
The Bank of Japan issued the following statement:
- At the Monetary Policy Meeting held today, the Policy Board of the Bank of Japan decided,
by an 8-1 majority vote, to set the following guideline for money market operations for the
intermeeting period:[Note 1]
The Bank of Japan will conduct money market operations so that the monetary base will increase at an annual pace of about 80 trillion yen.
With regard to the asset purchases, the Bank decided, by an 8-1 majority vote, to continue
with the following guidelines:[Note 1]
a) The Bank will purchase Japanese government bonds (JGBs) so that their amount
outstanding will increase at an annual pace of about 80 trillion yen. With a view to
encouraging a decline in interest rates across the entire yield curve, the Bank will conduct
purchases in a flexible manner in accordance with financial market conditions. The
average remaining maturity of the Bank's JGB purchases will be about 7-10 years.
b) The Bank will purchase exchange-traded funds (ETFs) and Japan real estate investment
trusts (J-REITs) so that their amounts outstanding will increase at annual paces of about 3
trillion yen and about 90 billion yen respectively.
c) As for CP and corporate bonds, the Bank will maintain their amounts outstanding at about
2.2 trillion yen and about 3.2 trillion yen respectively.
- a) The Bank will purchase Japanese government bonds (JGBs) so that their amount outstanding will increase at an annual pace of about 80 trillion yen. With a view to encouraging a decline in interest rates across the entire yield curve, the Bank will conduct purchases in a flexible manner in accordance with financial market conditions. The average remaining maturity of the Bank's JGB purchases will be about 7-10 years.
Japan's economy has continued to recover moderately, although exports and production have
been affected by the slowdown in emerging economies. Overseas economies -- mainly
advanced economies -- have continued to grow at a moderate pace, despite the slowdown in
emerging economies. Exports and industrial production have recently been more or less flat,
due mainly to the effects of the slowdown in emerging economies. On the domestic demand
side, business fixed investment has been on a moderate increasing trend as corporate profits
have continued to improve markedly. Against the background of steady improvement in the
employment and income situation, private consumption has been resilient and housing
investment has been picking up. Public investment has entered a moderate declining trend, although it remains at a high level. Financial conditions are accommodative. On the price
front, the year-on-year rate of change in the consumer price index (CPI, all items less fresh
food) is about 0 percent. Inflation expectations appear to be rising on the whole from a
somewhat longer-term perspective, although some indicators have recently shown relatively
With regard to the outlook, Japan's economy is expected to continue recovering moderately.
The year-on-year rate of change in the CPI is likely to be about 0 percent for the time being,
due to the effects of the decline in energy prices.
Risks to the outlook include developments in the emerging and commodity-exporting
economies, the prospects regarding the debt problem and the momentum of economic activity
and prices in Europe, and the pace of recovery in the U.S. economy.
Quantitative and qualitative monetary easing (QQE) has been exerting its intended effects,
and the Bank will continue with QQE, aiming to achieve the price stability target of 2 percent,
as long as it is necessary for maintaining that target in a stable manner. It will examine both
upside and downside risks to economic activity and prices, and make adjustments as
- With regard to the outlook, Japan's economy is expected to continue recovering moderately. The year-on-year rate of change in the CPI is likely to be about 0 percent for the time being, due to the effects of the decline in energy prices.