JP: Bank of Japan Announcement

Tue Jan 20 21:30:00 CST 2015

Consensus Actual Previous
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As expected, the Bank of Japan left its key interest rate range at zero to 0.1 percent. It said it would continue to buy JGBs at annual pace of Y80 trillion. The BoJ said its board members voted 8 to 1 to keep policy steady. Only Takahide Kiuchi voted against the decision once again, arguing that an earlier pace of purchases (Y60 trillion) was appropriate. The BoJ extended both its bank lending facility and pro-growth funding facility by one year to March 2016.

The Board acknowledged that increases in the CPI were likely to slow for the time being and its target of reaching 2 percent inflation will occur later than planned. The Board forecast that fiscal year 2015 core CPI excluding tax increase effects would be 1.0 percent on the year. However, the CPI excluding tax effects will be 2.2 percent in fiscal year 2016. GDP for the same time period is forecast to be 2.1 percent and 1.6 percent in fiscal year 2016. Fiscal year 2014 (the current fiscal year ending March 31) CPI excluding tax impact would be 0.9 percent. However, GDP for the 2014 fiscal year is expected to contract 0.5 percent.

The Bank of Japan is the central bank of Japan. The monetary policy board reviews economic conditions at home and abroad before making a policy decision. The decision is announced at the conclusion of its meeting. There is no specific time for the announcement.

The Bank of Japan Policy Board meets once a month for two days to discuss economic developments inside and outside of the country. The culmination of the meeting is the announcement of any adjustments to interest rates or other aspects of monetary policy. Like other central banks, the BoJ's goal is to ensure price stability while taking into account economic growth, employment and recommendations from the elected government while maintaining its independence. Unlike other central banks, the BoJ does not have an inflation target and has been engaged in fighting deflation. And while prices have risen thanks to soaring energy prices, these increases look fragile going forward.

The Bank announces its conclusions in a statement issued at the close of the monetary policy board meeting. The meetings are generally followed by a press conference by the Bank's governor. Needless to say, his comments are parsed carefully by the financial markets. In addition, the BoJ publishes minutes of the meeting about a month or so after the meeting but give detailed insight into the Bank of Japan's monetary policy decision making process. Every month the Bank releases a report covering trends in the Japanese economy and relevant international developments. The report summarizes recent economic indicators and gives the Bank's official position on Japanese economic growth. Because the BoJ sets monetary policy, any insight into the conclusions and assumptions the Bank is operating under can be helpful in predicting future interest rate actions.