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March 15, 2019BANK OF JAPAN MONETARY POLICY The Policy Board of the Bank of Japan announced today that it will maintain a short term policy interest rate of negative 0.1 per cent on balances held by financial institutions with the Bank. The Bank will continue its purchases of Japanese Government Bonds in order to keep 10-year yields at around zero per cent. These bond purchases will be flexible, with amounts outstanding rising by about 80 trillion yen per year. The Bank will continue purchasing exchange-traded funds at 6 trillion yen per year and real estate investment trusts at 90 billion yen per year. Commercial paper (2.2 trillion yen) and corporate bond (3.2 trillion yen) holdings by the Bank will be maintained.
The Bank of Japan is continuing with its policy of "Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control", with the aim to achieve price stability target of 2 per cent, as long as is necessary for maintaining the target in stable manner. The monetary base will continue to expand until the year-on-year rate of increase in the consumer price index (CPI, all items less fresh food) exceeds 2 per cent and stays above the target in stable manner. The Bank of Japan noted that they intend to maintain the current extremely low short- and long-term interest rates for an extended period of time.
Japan's economy is expanding moderately with a cycle of income growth into spending, but exports and production have been affected by slower global economic growth. Business fixed investment has continued upward trend with positive business sentiment and corporate profits. Housing investment has been flat and public investment has been flat at a relatively high level. The labour market continues to steadily tighten and financial conditions are highly accommodative.
The year-on-year CPI (all items less fresh food) continues to be in the 0.5-1.0 per cent range, but is likely to increase towards 2 per cent so long as the output gap remaining positive and medium to long-term inflation expectations rise.
Source: Bank of Japan's Statement on Monetary Policy
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