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January 24, 2019

Bank of Japan kept its monetary policy unchanged

Bank of JapanBank of Japan kept its monetary policy unchanged, sticking to optimistic prospects for the economy. The regulator stressed that they are convinced that a massive quantitative easing program helps to support inflation. The central bank also said the short-term interest rate remained at -0.1%, and the bank confirmed its goal of stabilizing yields on 10-year government bonds at around zero percent. GCC voted 8 votes against to leave key interest rates unchanged.

“The Japanese economy is growing moderately”, says the official statement of Bank of Japan.

The decision of the central bankers was taken after the recent macroeconomic data showed that wages declined at the fastest pace in six months, which gives a sign that demand will lose momentum this year and will weigh on the economy, which is currently enjoyed its longest period of growth in 28 years.

The strong Japanese yen, on the other hand, strengthens the central bankers fears, as it could also cool the export-dependent economy and hamper the rise in wages on the part of the business.

The Japanese central bank will continue to maintain its current policy for the foreseeable future as, given the way currency markets are currently in place, there will hardly be any discussion about going out of the quantitative easing program.

The central bank’s inflation target of about 2% remains far behind despite economic growth. The majority of economists expect the central bank to keep interest rates unchanged in the long run, although 40% are still waiting for an increase.

In its latest report, the Bank of Japan maintained its current forecast for consumer price increases (excluding food) by 1.4% in fiscal 2018 and by 1.8% in 2019. However, the fiscal year 2019 is expected inflation to reach 2%.

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