BoJ left monetary policy unchanged today as widely expected. Short term policy rate is held negative at -0.1%. The central bank will continue with asset purchase at around JPY 80T a year to keep 10 year JGB yield at around 0%. The decision was again made by 7-2 vote. Y. Harada against said allowing long-term yields to move to some extent was too ambiguous. G. Kataoka continued to push for strengthen easing.
On economic outlook, BoJ said the economy is “likely to continue its moderate expansion”. Domestic demand is likely to follow an uptrend, “with a virtuous cycle from income to spending being maintained in both the corporate and household sectors”. CPI is “likely to increase gradually toward 2 percent, mainly on the back of the output gap remaining positive and medium- to long-term inflation expectations rising”.
BoJ also maintained the risks include US macroeconomic policies, protectionist moves, emerging markets, Brexit and geopolitical risks.
Fed Mester: We’ll see a very strong second half of the year
Cleveland Fed President Loretta Mester said in a CNBC interview that “we’ll see a very strong second half of the year”. However, ” we are still far from our policy goals,” referring Fed’s dual mandate.
The March non-farm payrolls report was a “great” one. But Mester added, “we need more of them coming our way.” “I think we need to be very deliberately patient in our approach to monetary policy.”
Mester was not concerned with this year’s rise in treasury yields. “I think the higher bond yields are quite understandable in the context of the improvement in the economic outlook. The increase has been an orderly increase,” she said. “So I’m not concerned at this point with the rise in yields. I don’t think there’s anything for the Fed to react to.”