The Bank of Japan said on Tuesday that its board decided by a unanimous vote to leave the bank’s policy target unchanged, thus maintaining the pace of its large-scale financial asset purchases.
At is monthly two-day policy meeting, the board also decided unanimously to double the scale of its program to make low-interest loans to financial institutions that are leading to or investing in growth-oriented sectors and projects. The maximum amount of the loans will be raised to Y7 trillion from Y3.5 trillion.
The BOJ will extend the deadline for applying for the loans by a year. It was originally scheduled to end on March 31.
The board also voted to expand another facility which is aimed at stimulating lending by commercial banks. Financial institutions will be able to borrow funds from the BOJ up to an amount that is twice as much as the net increase in their lending. The application period for this program, which was due to end on June 30, 2018, will also be extended by a year.
Under the two programs, lenders will be able to borrow funds from the BOJ at a fixed rate of 0.1% per annum for four years, instead of the existing period of one to three years.
“The bank expects that these enhancements will further promote financial institutions’ actions as well as simulate firms’ and households’ demand for credit, with a view to encouraging banks’ lending and strengthening the foundation for economic growth,” the BOJ said.
As for the monetary policy target, the BOJ will continue conducting money market operations so that the monetary base will increase at an annual pace of about Y60 trillion to Y70 trillion. The annual pace of the BOJ’s purchases of Japanese government bond will remain at about Y50 trillion.
On the current climate, the BOJ repeated its recent view: “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.”
“Japan’s economy is expected to continue a moderate recovery as a trend, while it will be affected by the front-loaded increase and subsequent decline in demand prior to and after the consumption tax hike.”
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.”
The board’s risk assessment is also unchanged: “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.”
But board member Sayuri Shirai dissented from endorsing this analysis again, urging that the pace of improvement in employment and income in Japan should be added to the list of risks.
BOJ Governor Haruhiko Kuroda will hold a news conference from 1530 JST (0630 GMT) to 1615 JST (0715 GMT) to discuss the board’s decision.