Bank of Japan policy board maintains ultra-loose policy settings

YCC means buying bonds at a slower rate than would occur under a quantitative easing policy. It affects long term interest rates. The Japanese fiscal begins on April 1.

The decision was widely expected after BOJ governor Kazuo Ueda said last month the central bank would ‘patiently’ maintain the current policy as there is still some way to achieve its 2 per cent inflation target stably and sustainably.

Ueda had also said the central bank expects inflation to slow below 2 per cent toward the middle of the current fiscal and rebound thereafter. This would be around September-October, the bank said today.

The central bank maintained short-term interest rate target at minus 0.1 per cent; its 10-year Japanese government bonds (JGB) yield target around 0 per cent; and its band around the 10-year JGB yield target at plus or minus 50 basis points.

The bank will continue with large-scale JGB purchases and make nimble responses for each maturity by increasing the amount of JGB purchases and conducting fixed-rate purchase operations, it said in a release.

Although exports and industrial production in the country have been affected by the developments in overseas economies, they have been more or less flat, supported by a waning of the effects of supply-side constraints, BOJ noted.

With corporate profits being at high levels on the whole, business fixed investment has increased moderately, and the employment and income situation has improved moderately, it said.

Private consumption has increased moderately, despite being affected by price rises.

Japan's economy is likely to recover moderately around the middle of this fiscal, supported by factors such as the materialisation of pent-up demand, although it is expected to be under downward pressure stemming from past high commodity prices and a slowdown in the pace of recovery in overseas economies, the central bank said.

Thereafter, as a virtuous cycle from income to spending gradually intensifies, Japan's economy is projected to continue growing at a pace above its potential growth rate. The pace of growth is highly likely to decelerate gradually, it added.

Fibre2Fashion News Desk (DS)