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December 19, 2019BANK OF JAPAN MONETARY POLICY 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 further provided updated forward guidance that short and long term interest rates are expected to remain at current low rates or lower as long as is necessary to guard against the possibility of losing momentum towards the price stability target.
The Bank will continue its purchases of Japanese Government Bonds in order to keep 10-year yields at around zero per cent, though yields may move up and down depending on economic activity and prices. 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 economic outlook for Japan indicates that the economy is expected to moderate on an expanding trend, though at a slower pace than in previous forecasts. The Bank expects limited impact from global slowdown on domestic demand, but export growth will slow. With a positive (but narrowing) output gap, inflation is projected to increase gradually towards the Bank's 2 per cent target. The Bank of Japan noted that risks are mainly skewed to the downside because of slower global economic activity, which blunts medium and long term inflation expectations and may slow momentum towards the price stability target.
Source: Bank of Japan's Statement on Monetary Policy
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