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Thomas StorringDirector – Economics and Statistics
Tel: 902-424-2410Email:

September 20, 2019

The Policy Board of the Bank of Japan announced that it will maintain the negative interest rate of -0.1 per cent on balances of financial institutions at 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. Furthermore, the Board will continue to maintain these interest rates for an extended period of time - at least until the Spring of 2020.

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. With the downside risk of slowing overseas economies materializing, the Bank judges that it is becoming necessary to pay closer attention to the possibility that momentum towards the price stability target will be lost. The Bank of Japan will re-examine economic and price developments at the next meeting in October.

Japan’s economy has experienced a virtuous cycle from income to spending, but production, exports, and business sentiment have been affected by the slowdown in other economies. Steady improvement has been made in employment and incomes. Housing and public investment have been relatively flat and labour market conditions remain tight in the country. Japan's economy is likely to continue on a moderate expanding trend despite being affected by slowdown in overseas economies. Domestic demand is supported from income growth in corporate and household sector, highly accommodative financial conditions, and government spending despite the scheduled consumption tax increase.

Consumer inflation is around 0.5 per cent and inflation expectations are unchanged. The year-on-year CPI change is likely to increase gradually toward 2 per cent conditional on the output gap remaining positive and medium- to long-term inflation expectations rising.



Source: Bank of Japan's Statement on Monetary Policy

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