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Economics Gazette

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October 22, 2019

Bank of Japan raised its assessment for economy growth

Bank of JapanBank of Japan raised its assessment for economy growth, but left its monetary policy unchanged at the end of its session on Thursday. According to the bank’s analysis, the Japanese economy will continue to expand at a good pace throughout the fiscal 2017-2018 amid weak financial conditions and ongoing economic expansion across borders.

The bank has already forecast a GDP growth of 1.6% over the previous assessment of 1.5%. For the next year, the GDP growth is expected to be 1.3% above the previous 1.1% rise, while in 2019 the expectations are for an increase of 0.7%.

According to Bank of Japan, there is still a possibility for a new downward revision because the upward momentum of inflation is not stable enough. The ECB notes that inflation is likely to continue its upward trend to medium-term target of 2.0%, reaching 1.9% in the financial 2019/2020. However, the weaker inflation is expected to stand at 1.4% during the current fiscal year. The previous estimate was an increase of 1.5%.

The central bank expects the short-term interest rate to stand at -0.1% and confirms its goal of stabilizing yields on 10-year government bonds to scratch. Bank of Japan kept the current program amount for quantitative and qualitative reliefs unchanged at the annual level of 80 trillion JPY, as well as the volume of ETF and Real Estate Investment Trusts (REITS).

Although almost all analysts were expecting the bank to leave its monetary policy unchanged, some believed that the bank would eventually cancel its 80 billion-dollar purchase target.

Some members of the board of the JCB, however, believe that the volume of purchases is a more important parameter of the interest rate and they are reluctant to make any retreats that could be interpreted by the markets as preparation for policy tightening.

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