The Bank of Japan kept the interest unchanged at 0.10% in the monetary policy meeting held today. The Bank of Japan will conduct money market operations so that the monetary base will increase at an annual pace of about 60-70 trillion yen.
Japan’s economy has continued to recover moderately, and a front-loaded increase in demand prior to the consumption tax hike has recently been observed.Overseas economies mainly advanced economies are starting to recover, although a lackluster performance is still seen in part. Exports have recently leveled off more or less. The pickup in business fixed investment has become increasingly evident as corporate profits have improved. Public investment has continued to increase. With improvement in the employment and income situation, housing investment has continued to increase and private consumption has remained resilient; in these segments of the economy, the front-loaded increase in demand prior to the consumption tax hike has also been observed. Reflecting these developments in demand both at home and abroad, industrial production has been increasing at a somewhat accelerated pace. Meanwhile, financial conditions are accommodative.On the price front, the year-on-year rate of increase in the consumer price index (CPI, all items less fresh food) is around 1¼ percent. Inflation expectations appear to be rising on the whole. Risks to the outlook include developments in the emerging and commodity-exporting economies, the prospects for the European debt problem, and the pace of recovery in the U.S. economy.
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 will examine both upside and downside risks to economic activity and prices, and make adjustments as appropriate. Such conduct of monetary policy will support the positive movements in economic activity and financial markets, contribute to a rise in inflation expectations, and lead Japan’s economy to overcome the deflation that has lasted for nearly 15 years.