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. Takahide Kiuchi voted against the decision once again, arguing that an earlier pace of purchases (Y60 trillion) was appropriate.
The statement was relatively upbeat considering the fourth quarter gross domestic product data indicated that the economy is emerging more slowly from recession than most economists had anticipated. The BoJ said the economy "has continued its moderate recovery trend," with exports picking up and corporate profits improving. Private consumption as a whole has remained resilient against the background of steady improvement in the employment and income situation, although recovery in some areas has been sluggish.
Inflation is moving further away from the bank's 2 percent target. The consumer price index rose only 0.5 percent on the year in December excluding the effect of the consumption tax increase last April due to the decline in crude oil prices. The BoJ is more concerned with what price levels would have been without the cheaper crude, though, and will likely continue to observe the effects of increasing prices and wages.
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.