The Bank of Japan began a two-day policy meeting on Monday, with its decision-making board likely to maintain its stance on monetary easing despite recent signs of economic strength in the country as inflation continues to run below target.
Markets are likely to focus on any hints on the future direction of the bank’s policy in Governor Haruhiko Kuroda’s post-meeting press conference, particularly after a slight reduction in the BOJ’s offers to buy government bonds earlier this month was seen by investors as signaling future tightening and caused long-term interest rates and the yen to jump.
A step toward winding down the massive monetary stimulus adopted in 2013 would align with similar moves in the United States, eurozone and Britain, but is doubly unlikely as the end of Kuroda’s current term, in April, looms.
Prime Minister Shinzo Abe will submit his pick for the next BOJ chief during the ordinary Diet session that was convened Monday. Central bank watchers say the odds are high that Kuroda will be reappointed.
The BOJ’s current main policy framework, dubbed yield curve control, consists of an interest rate of minus 0.1 percent on some funds that financial institutions keep parked at the central bank, and guiding the yield on the 10-year government bond at around zero percent through bond purchases.
After the meeting the central bank will release its quarterly report on the economic outlook, with the Policy Board expected to raise its forecast for Japan’s growth in fiscal 2018 amid robust exports and capital expenditure.
In the previous outlook report released in October, the board’s median forecast for expansion in real gross domestic product in the year through March 2019 was 1.4 percent. The Abe administration expects inflation-adjusted GDP to grow 1.8 percent in the same period.
BOJ policymakers have less reason to be optimistic about the outlook for inflation, which the central bank is targeting at 2 percent in an attempt to prevent the country’s relapse into deflation.
Core consumer prices, excluding volatile fresh food prices, have edged up over the past year, marking a 0.9 percent year-on-year rise in November. But this has largely been thanks to rising energy prices, not an increase in private consumption as hoped.
In October, the BOJ board forecast an inflation rate of 1.4 percent for fiscal 2018.
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