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BOJ keeps growth monetary policy
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The Bank of Japan maintained its expansionary monetary policy yesterday and extended special loan programs to help buoy economic growth, signaling its resolve to keep the positive mood generated by Prime Minister Shinzo Abe’s reflationary policies from fading.
The central bank reiterated its upbeat view on the economy, unfazed by recent signs of slowing growth and suggesting that any additional stimulus will be some time away.
BOJ Governor Haruhiko Kuroda said the expansion was aimed at enhancing the transmission mechanism of quantitative easing by encouraging banks to boost lending instead of sitting on piles of cash.
“We have an engine with big horsepower, so it makes sense to have stronger tires,” he told reporters after the decision.
As widely expected, the BOJ yesterday kept its pledge of increasing base money, its key monetary policy gauge, at an annual pace of 60-70 trillion yen (US$589-687 billion).
The central bank also stuck to its assessment that Japan is recovering moderately, a sign it remains confident the world’s third-largest economy can weather the pain from a sales tax increase in April without additional stimulus.
“The BOJ already expects the economy to contract immediately after the sales tax hike, so this cannot be the basis for additional easing,” said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management in Tokyo.
The BOJ has stood pat on policy since launching an intense burst of stimulus last April, when it pledged to accelerate inflation to 2 percent in roughly two years via aggressive asset purchases in a country mired in deflation for 15 years.
Monday’s weaker-than-expected fourth-quarter GDP has dashed hopes that a rush in household spending ahead of the April tax hike would cushion the pain from sluggish export growth.
While the central bank is in no mood to act immediately, market pressure for further stimulus may heighten in coming months if there is more evidence that personal consumption is losing momentum, some analysts say.
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