JP: Bank of Japan Announcement

Wed Apr 29 23:10:00 CDT 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 vote to maintain its policy was 8 to 1. Takahide Kiuchi voted against the decision once again, arguing that a pace of purchases (Y45 trillion) was appropriate.

The BoJ pushed back its target date for reaching 2 percent inflation. Now Governor Haruhiko Kuroda said he expects the goal to be reached "around the first half of fiscal 2016," instead of the original plan for "within fiscal 2015." At its latest monetary policy board meeting, the BoJ reduced its median inflation projection for fiscal 2015 from 1.0 percent to 0.8 percent, with Kuroda citing declining crude oil prices and "a slight sluggishness in the recovery of consumer spending." However, the Bank expects "the recovery of inflation will speed up in the second half of fiscal 2015 and reach the 2 percent target around the first half of fiscal 2016.

The central bank retained its view that, "The upward trend of consumer prices is recovering and will continue to recover," supported by an upswing in consumer spending on the back of improved corporate performances and wage increases. Kuroda said there is no need for additional monetary easing at this stage, "but if the trend of consumer prices changes, we will not hesitate to adjust policy."

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.