Bank Of Japan Keeps Policy Unchanged, Raises Growth Forecast
April 27 2017 - 12:46AM
RTTF2
Japan's central bank left its monetary policy unchanged on
Thursday and policymakers upgraded the view on the economy as they
raised the growth forecasts, expecting ultra low interest rates,
fiscal stimulus and better demand from abroad to support
above-potential expansion in future.
The Bank of Japan policy board, led by Governor Haruhiko Kuroda,
voted 7-2 to retain the central bank's target of raising the amount
of outstanding Japan government bond holdings at an annual pace of
about JPY 80 trillion.
The BoJ board also voted to retain the -0.1 percent interest
rate on current accounts that financial institutions maintain at
the bank.
The central bank will purchase government bonds so that the
yield of 10-year JGBs will remain at around zero percent.
"Japan's economy is likely to continue expanding and maintain
growth at a pace above its potential, mainly through fiscal 2018,
on the back of highly accommodative financial conditions and the
effects of the government's large-scale stimulus measures, with the
growth rates in overseas economies increasing moderately," the bank
said in its quarterly outlook report released on Thursday.
"In fiscal 2019, the economy is expected to continue expanding,
although the growth pace is projected to decelerate due to a
cyclical slowdown in business fixed investment and the effects of
the scheduled consumption tax hike."
The bank raised the GDP growth forecast for this fiscal year to
1.6 percent from 1.5 percent seen in January. The outlook for next
year was increased to 1.3 percent from 1.1 percent. For 2019, the
bank projected 0.7 percent growth.
Meanwhile, the inflation forecast for this fiscal was lowered to
1.4 percent from 1.5 percent. The projection for next fiscal year
was retained at 1.7 percent. The outlook for fiscal 2019 was 2.4
percent and 1.9 percent after excluding the effects of the planned
consumption tax hike.
"Today's downward forecast adjustment highlights that the Bank
is still struggling to lift inflation," Capital Economics economist
Marcel Thieliant said.
The economist believes that the Bank remains too optimistic
about inflation mainly due to tepid wage growth despite a tight
labor market.
Even if inflation picks up more rapidly than anticipated, the
Bank has pledged to allow inflation to overshoot the 2 percent
target for a while, Thieliant pointed out. And policymakers will
feel reluctant to tighten policy ahead of the sales tax hike
currently scheduled for October 2019, the economist added.
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