JP: Bank of Japan Announcement

Thu Dec 17 21:50:00 CST 2015

Consensus Actual Previous
Change 0bp 0bp 0bp
Level 0-0.1% 0-0.1% 0-0.1%

As anticipated, the Bank of Japan decided to leave its monetary policy unchanged. The BoJ left its key interest rate range at zero to 0.1 percent. It also said it would continue to buy JGBs at an annual pace of ¥80 trillion. The vote to maintain its policy was 8 to 1. Once again, Takahide Kiuchi voted against the decision arguing that a reduced pace of purchases (¥45 trillion) was appropriate.

The BoJ however, decided to extend JGB duration to 7 to 12 years next year from 7 to 10 years. The Bank will also buy exchange traded funds (ETFs) and Japan real estate investment trusts (J-REITs) so that their amounts outstanding will increase at annual paces of about ¥3 trillion and about ¥90 trillion respectively. The vote on these changes was 6 to 3. Ishida, Sato, Kiuchi voted against longer maturity JGBs.

BoJ continued to say that the economy "has continued to recover moderately, although exports and production have been affected by the slowdown in emerging economies." The MPB said that the core CPI was likely to continue to be about zero for now due to the decline in energy prices. It noted that the economy has continued to recover moderately and is likely to continue to do so. The BoJ said that output remains flat but CAPEX is on a moderate rising trend. It noted that private consumption has been resilient.

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.