Business / Economy

BOJ stands pat on monetary easing policy


The Bank of Japan on Friday kept its ultraeasy monetary policy in place and left its assessment of the economy unchanged for the third month straight, describing it as “recovering moderately” amid improved corporate sentiment.

After a two-day meeting, the nine-member Policy Board decided unanimously to continue the central bank’s radical quantitative easing policy going. The policy, launched in April, aims to double the nation’s monetary base by buying up government bonds to artificially stoke 2 percent inflation in two years.

The policymakers are believed to have also discussed the impact on Japan of the U.S. Federal Reserve’s decision Wednesday to start tapering its similar but smaller stimulus program in January.

The BOJ kept its opinion on the economy unchanged after its quarterly “tankan” survey said Monday that corporate sentiment was improving, although many respondents expect it to worsen in the next three months amid the uncertain outlook for the global economy.

“Improvement in business sentiment has continued and become widespread,” the BOJ said in a statement.

But the bank upgraded its view on employment and income, which it said are supporting solid consumer spending. Real wages are falling.

It said the economy will be “affected by the front-loaded increase and subsequent decline in demand” before and after the first stage of the consumption tax hike in April, but maintained its view that a moderate recovery will continue.

The BOJ said the year-on-year rate of change in the consumer price index is at around 1 percent after government data showed last month that consumer prices rose 0.9 percent in October from a year earlier, the fastest growth in five years, as the Abenomics-weakened yen drives the cost of food and energy higher.

“Inflation expectations appear to be rising on the whole,” the BOJ said, adding that consumer prices are likely to rise for the time being.

To overcome deflation, the bank is aiming to attain 2 percent inflation, excluding the impact of the sales tax hike in April, from late fiscal 2014 to early fiscal 2015.

“The bank will continue with quantitative and qualitative monetary easing, aiming to achieve the price stability target of 2 percent, as long as it is necessary for maintaining that target in a stable manner,” it said.

The BOJ agreed there remains “a high degree of uncertainty” concerning the economy, citing such factors as the prospects for the European debt problem, developments in emerging economies and the pace of a U.S. economic recovery.

Under its radical monetary policy, the BOJ is conducting market operations to increase the monetary base at an annual pace of about 60 trillion to ¥70 trillion by gobbling up government bonds and more risky debt.

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