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April 25, 2019BANK OF JAPAN MONETARY POLICY The Policy Board of the Bank of Japan announced today that it will maintain the negative interest rate of -0.1 per cent on balances of financial institutions at the Bank. Furthermore, the Board clarified that the Bank intends to maintain these interest rates for an extended period of time - at least until the Spring of 2020. This forward guidance reflects uncertainties in global economic activity, weak inflation and an upcoming consumption tax increase.
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's "powerful monetary easing" and forward guidance is further accompanied by expansion of eligible collateral for the Bank's credit provisions. The Bank expects that this will maintain the output gap in positive territory, leading to its price stability target.
Japan's economy is projected to continue its expansion, as weaker global conditions and exports are offset by stronger domestic demand fuelled by both fiscal and monetary policy. Although CPI (year-on-year for all items less fresh food) is positive, it remains weak relative to labour market and GDP indicators. Expectations of price inflation remain persistently cautious even though there is a positive output gap. Rising productivity has also contributed to moderating inflation in Japan.
Source: Bank of Japan's Statement on Monetary Policy
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