Thursday, June 15, 2017

BOJ keeps policy stance as consumption more resilient

     Japan's central bank left its monetary policy stance unchanged and made only minor changes to its comments on the current economic situation with regards to growth in overseas economies and domestic private consumption.
     The Bank of Japan (BOJ), which in September 2016 shifted the focus of its policy of quantitative easing toward "yield curve control," repeated its view from its policy statement in April that the economy "is likely to continue its moderate expansion" while inflation "is likely to continue on an uptrend and increase toward 2 percent, mainly on the back of an improvement in the output gap and a rise in the medium-to-long-term inflation expectations."
      In its comments on the economic situation, the BOJ today said "overseas economies have continued to grow at a moderate pace on the whole," omitting a reference to emerging markets in its April 27 statement when it said "overseas economies have continued to grow at a moderate pace, although emerging economies remain sluggish in part."
      Regarding private consumption in Japan, the BOJ today said there was "increased it resilience" as compared to April when it merely said that "private consumption has been resilient."
     Consumer spending in Japan has been rising in the last six quarters.
      In April BOJ forecast economic growth in fiscal 2016 of 1.4 percent, unchanged from its January forecast, but raised the outlook for fiscal 2017, which began on April 1, to 1.6 percent from 1.5 percent and the 2017 forecast to 1.3 percent from 1.1 percent.
      In the first quarter of this year, Japan's Gross Domestic Product grew by an annual rate of 1.3 percent, down from 1.6 percent in the previous quarter.
       The forecast for consumer price inflation in fiscal 2016 was lowered to minus 0.3 percent from a previous 0.2 percent and the forecast for fiscal 2017 to 1.4 percent from 1.5 percent. For fiscal 2018, the forecast was unchanged at 1.7 percent.
       Headline inflation in April rose to 0.4 percent from 0.2 percent in March for the seventh consecutive month of positive growth in consumer prices.
       The BOJ maintained its interest rate of minus 0.10 percent on banks' deposits that exceed reserve requirements and will continue purchasing government bonds around its current pace of around 80 trillion yen in order to keep 10-year government bond yields around 0 percent.
    In addition, the BOJ will purchase exchange-traded funds (ETFs) and real estate investment trusts so their outstanding amount rise by an annual pace of about 6 trillion yen and about 90 billion yen, respectively.
    The BOJ will also continue purchasing commercial paper and corporate bonds at a pace of about 2.2 trillion and 3.2 trillion yen, respectively.



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