The Bank of Japan said on Wednesday its board decided by a unanimous vote to leave the bank’s policy target unchanged as expected at its two-day monthly meeting, maintaining its overall economic assessment.
“The Bank of Japan will conduct money market operations so that the monetary base will increase at an annual pace of about Y60 to Y70 trillion,” the BOJ said.
The BOJ will continue to increase its purchases of Japanese government bonds at an annual pace of about Y50 trillion. The average remaining maturity of the bank’s JGB buying will remain about seven years.
The only major change found in the BOJ monetary policy statement was that board member Sayuri Shirai didn’t disagree with the board’s collective analysis of downside risks this month amid growing optimism about job and income prospects.
From January to April, Shirai dissented from endorsing the analysis, urging that the pace of improvement in employment and income in Japan should be added to the list of risks.
The board left its risk assessment unchanged from last month: “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.”
Meanwhile, board member Takahide Kiuchi continued to propose the BOJ should maintain the high degree of easing only during the two-year period from April 2013 so that it is not overdone. But his proposal was again voted down by the rest of the board.
The BOJ also maintained its outlook, repeating, “Japan’s economy is expected to continue a moderate recovery as a trend, while it will be affected by the subsequent decline in demand following the front-loaded increase prior to the consumption tax hike.”
Following a higher-than-expected capital investment in the January-March GDP data released last week, the BOJ revised up its view on capex, saying, “Business fixed investment has increased moderately as corporate profits have improved.”
Last month it said, “The pick-up in business fixed investment has become increasingly evident as corporate profits have improved.”
The BOJ also upgraded its view on public investment, saying it has more or less leveled off a high level.
Japanese exports “have recently leveled off more or less,” it said, repeating its recent assessment as export growth remains low.
Citing resilient consumption, the main driver of the recent economic growth, the BOJ repeated that “industrial production has been on a moderate increasing trend.”
The BOJ’s near-term inflation outlook remains the same. It expects the year-on-year rate of increase in consumer prices (excluding the direct impact of the sales tax hike) “is likely to be around 1.25% for some time.”
Kuroda will hold a news conference from 1530 JST (0630 GMT) to around 1615 JST (0715 GMT) to discuss the board’s decision.