BoJ Keeps Monetary Policy Steady; Cuts Inflation Outlook
22 Enero 2019 - 06:33PM
RTTF2
The Bank of Japan kept its monetary policy unchanged on
Wednesday, but downgraded the inflation forecasts, primarily driven
by a sharp fall in oil prices.
The Policy Board of the BoJ voted 7-2 to purchase government
bonds so that the yield of 10-year JGBs will remain at around zero
percent.
The board maintained interest rate at -0.1 percent on current
accounts that financial institutions maintain at the bank.
The central bank said it will conduct purchases of Japanese
government bonds in a flexible manner so that the outstanding
amount will increase at an annual pace of about JPY 80
trillion.
The bank asserted that it will maintain the current extremely
low interest rates for an extended period of time, reflecting the
uncertain economic outlook and prices, including the impact of the
consumption tax hike scheduled for October next year.
The BoJ said it will continue with "Quantitative and Qualitative
Monetary Easing with Yield Curve Control" policy, aimed to attain
the inflation goal of 2 percent, and to maintain that target in a
stable manner.
The bank reiterated that it will continue expanding the monetary
base until the year-on-year rate of increase in the observed
consumer price index, or CPI, exceeded 2 percent and stayed above
the target in a stable manner.
In its quarterly outlook report, the BoJ said "the momentum
toward achieving the price stability target of 2 percent is
maintained but is not yet sufficiently firm, and thus developments
in prices continue to warrant careful attention."
The BoJ noted that the Japanese economy was "expanding
moderately", with risks to economic activity and prices skewed to
the downside.
The central bank said the Japanese economy is projected to
continue its expanding trend through fiscal 2020.
Overseas economies would continue expansion as a whole, although
various developments of late, warrant attention such as the trade
friction between the United States and China.
The central bank revised down the real GDP growth outlook for
the fiscal year ending March this year to 0.9 from 1.4 percent.
The projection for the fiscal year ending March 2020 was revised
up to 0.9 percent from 0.8 percent and that for fiscal year ending
March 2021 was lifted to 1.0 percent from 0.8 percent.
But the bank downgraded the projection for both headline and
core inflation for the fiscal year ending March 2019 to 0.8 percent
from 0.9 percent.
The headline inflation forecast for the fiscal year ending March
2020 was trimmed to 1.1 percent from 1.6 percent, and the core
inflation outlook was slashed to 0.9 percent from 1.4 percent.
For the fiscal year ending March 2021, the headline inflation
projection was cut to 1.5 percent from 1.6 percent and the core
inflation forecast was trimmed to 1.4 percent from 1.5 percent.
The Bank of Japan is likely to keep its short-term policy rate
and 10-year yield target unchanged beyond next year, Marcel
Thieliant, an economist at Capital Economics, said.
The analyst believed that the BoJ's policy tightening remained a
very distant prospect given sharp downward revision to its
inflation forecasts for this year and next.
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