The Policy Board of the Bank of Japan decided to leave monetary policy unchanged after the introduction of their Quantitative and Qualitative Easing with Yield Curve Control policy last year. The Bank of Japan will continue to apply a -0.1 per cent to Policy-Rate Balances for current accounts held by the Bank and they will purchase government bonds to keep the 10-year yield around zero per cent. Purchases for Japanese government bonds will be around 80 trillion yen per year and 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 and corporate bond holdings by the Bank will be maintained.

A summary of the Bank of Japan's Outlook for Economic Activity has domestic demand continuing to trend upwards as a positive cycle from income to spending is maintained in both the corporate and household sectors as financial conditions are highly accommodative and government large-scale stimulus is underway. Business investment is will be on moderate increasing trend supported by financial conditions, higher growth expectations, and preparation for the Olympic Games in 2020. Exports are expected to follow a moderate increasing trend with improvements in overseas led by advanced economies and recovering emerging economies. Japan's economy is expected to growing above its potential through fiscal 2018.

The consumer price inflation rate is likely to increase from current 0 per cent and become positive as energy prices rise. Afterwards progress is expected towards 2 per cent as the output gap improves and medium term inflation expectations rise. The inflation rate is projected to reach around 2 per cent around fiscal 2018.

Source: Bank of Japan's Statement on Monetary Policy