As widely anticipated, BOJ again voted 8-1 to leave the monetary policies unchanged in October. The targets for short- and long-term interest rates stay at -0.1% and around 0%, respectively while the guideline for JGB purchases remains at an annual pace of about 80 trillion yen. The central bank has turned more upbeat on the economic outlook, especially on Capex and consumption. Goushi Kataoka was again the lone dissent as he supported bond purchases so as to facilitate the decline of 10-year (or over) bond yields. Governor Kuroda’s speech at the press conference has not tilted towards less easing/ policy normalization in the near-term

BOJ reiterated that domestic economic is ‘expanding moderately’. Policymakers noted that ‘business fixed investment has continued on an increasing trend’. This is compared with October’s reference that ‘business fixed investment has been on a moderate increasing trend’. Yet, they suggested that ‘public investment has been more or less flat, remaining at a relatively high level’. This reference appears softened slightly from the October one noting ‘public investment has been increasing’. The central bank appears less concerned about the inflation outlook, though it reiterated that ‘inflation expectations have remained in a weakening phase’. It retained the view that the year-on-year rate of change in the CPI should continue ‘on an uptrend and increase toward 2%, mainly on the back of an improvement in the output gap and a rise in medium- to long-term inflation expectations’.

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Being the single dissenter for a third time, Kataoka repeated his stance that ‘the possibility of the year-on-year rate of change in the CPI increasing toward +2% going forward was low at this point’. Therefore, ‘it was appropriate for the Bank to purchase JGBs so that yields on JGBs with maturities of 10 years and longer would be broadly lowered’. He also warned that in case of ‘a delay in the timing of achieving the price stability target due to domestic factors, the Bank should take additional easing measures’.

Those who had anticipated hints on policy normalization would have been disappointed. The tones of both the accompanying statement and Kuroda’s press conference are in line: pledging that it would ‘continue with ‘Quantitative and Qualitative Monetary Easing (QQE) with
Yield Curve Control,’ aiming to achieve the price stability target of 2 percent, as long as it is ecessary for maintaining that target in a stable manner’. Kuroda has not downplayed the importance of monetary easing by discussing about the side-effects of accommodative policy,


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