The Bank of Japan’s Asset Purchase Program Remains Unchanged

March 11, 2014 in Forex Fundamentals and News

The Bank of Japan concluded its Monetary Policy Meeting today and decided unanimously to carry forward unchanged its policies for money market operations and asset purchase.

As previously, the bank targeted management of its money market operations so as to allow for the monetary base to grow annually by about ¥ 60-¥ 70 trillion.

On asset purchases, the bank said it will purchase Japanese government bonds within the twin remits of an annual increase in the outstanding amount by about ¥ 50 trillion, as well as keeping the average balance maturity of its bond purchases at about seven years. The bank will also continue purchasing ETF’s and Japanese real estate investment trusts with annual increase in the holdings limited to about ¥ 1 trillion and ¥ 30 billion respectively. Purchases of CP and corporate bonds will be maintained within the ceiling of outstanding amounts of ¥ 2.2 trillion and ¥ 3.2 trillion respectively.

The bank also declared that its monetary easing policy will continue with the aim to achieve a “price stability target” of 2%, keeping in view risks to economic activity, and making adjustments as required.

The bank summarised its outlook on the Japanese economy saying it has “continued to recover moderately, and a frontloaded increase in demand prior to the consumption tax hike has recently been observed.” The bank expressed satisfaction that corporate profits and business fixed investment have recovered, with a resulting improvement in employment and income situation. Taken with the gradual recovery in the overseas advanced economies, these developments reflected better demand, both domestic and foreign, leading to an accelerated pace of increase in industrial production.

“Japan’s economy is expected to continue a moderate recovery as a trend, while it will be affected by the frontloaded increase and subsequent decline in demand prior to and after the consumption tax hike,” said the bank in its statement.

The bank also noted that “inflation expectations appear to be rising on the whole,” with the consumer price index rising year-on-year by 1.25%.

Later, at a press conference, BOJ governor Haruhiko Kuroda, acknowledged that the weak yen had so far failed to boost exports to the desired level but said the BOJ continues to be confident that the economy will weather the effect of the imminent sales tax increase.

Japanese exports

The conditions are unlikely also to trigger increased doses of monetary easing given that the CPI is gradually edging up in the direction of the bank’s target of 2%. In any case, the bank stood by to make any adjustments to monetary policy as may be required.

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