Daily Management Review

Bank of Japan will not refuse QE


12/07/2016


Bank of Japan did not shift the focus from expansion of the monetary base on the way to achieving inflation target, Deputy Governor of the Bank of Japan Kikuo Iwata said. The controller will continue large-scale purchase of assets after transition to the new principles of monetary policy and targeting interest rates, Iwata stressed.



japanexperterna.se
japanexperterna.se
"I would like to stress that the bank will continue to expand the monetary base in the future according to new policy - Iwata said, speaking to businessmen in Nagasaki. - Some argued that the emphasis has shifted from the bank's policy of quantitative easing on interest rates ... but this understanding is incorrect. "

Statement of Deputy Governor of the Bank of Japan reflects concerns of some representatives of the regulator. They are worried with the fact that market participants came to conclusion that the Central Bank has actually completed expansion of QE program, Bloomberg writes.

Some experts, including analysts of Deutsche Bank, reported that the Bank of Japan may begin curtailing the program of buying Japanese government bonds next year as it is faced with practical limitations on purchases.

In September, the Bank of Japan abandoned the monetary base landmark as one of the main targets. Instead, the regulator began to target the yield on 10-year government bonds at around 0%. At that, the regulator continues to buy Japanese government bonds by 80 trillion yen ($ 701 billion) annually.

Head of the Bank of Japan Haruhiko Kuroda said that the regulator will be expanding the monetary base unless inflation rises above 2%. Further reduction of interest rates into negative territory and targeting bond yields will be main options to further incentives, he said

Iwata was appointed Deputy Head of the Bank of Japan in March 2013. Then, he called on the Bank of Japan to pour money into the national economy and achieving the predicted target with 2% inflation for two years. This goal remains elusive: in October core consumer price index fell by 0.4% in annual terms.

"There is no doubt that this policy was effective to overcome deflation - said Iwata on Wednesday. -However, actually, the goal for inflation of 2% is not yet reached, despite the unprecedented massive easing of monetary policy." 

The next meeting of the Bank of Japan will be held on December 19-20.

Consumer prices in Japan has been falling for several months in a row, and household spending fell sharply in September. This supports a view of need to control timing of expansion in order to achieve the inflation target of 2%, as the economy stagnates.

A survey, conducted among Japanese companies by Reuters in September, showed that only few of them expect real results from the central bank’s aggressive monetary policy,. At least the majority does not believe in achievement of the inflation target.

Since the last meeting of the Central Bank, when the institution announced its plan of management of the yield curve, the yen has weakened considerably, and a number of other assets and indicators have showed remarkable stability. 

source: bloomberg.com






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