BoJ left monetary policies unchanged today as widely expected. New economic projections are also released with upgrade in fiscal 2019 and 2020 GDP forecasts. But inflation forecasts was lowered rather sharply for fiscal 2019.
The short term interest rate is held unchanged at -0.1%. And under the yield curve control frame work, BoJ will continue to kept 10-year JGB yield at around 0%, with some upward and downward movements allowed. The annual amount of JGB purchase will be kept at JPY 80T.
Member G. Katakoa dissented as usual, pushing to strengthen monetary easing. Y Harada also dissented again, criticizing that allowing the long-term yields to move upward and downward to some extent was too ambiguous
On economy, BoJ maintained that “Japan’s economy is likely to continue on an expanding trend through fiscal 2020.” Also, “overseas economies are expected to continue growing firmly on the whole, although various developments of late warrant attention such as the trade friction between the United States and China.”
In the new GDP projections, comparing with October forecasts:
- Fiscal 2018 is revised to 0.9% to 1.0% (median 0.9%), down from 1.3% to 1.5% (median 1.4%).
- Fiscal 2019 is revised to 0.7% to 1.0% (median 0.9%), up from 0.8% to 0.9% (median 0.8%).
- Fiscal 2020 is revised to 0.7% to 1.0% (median 1.0%), up from 0.6% to 0.9% (median 0.8%).
The revisions showed that while BoJ is optimistic for 2019, it also sees larger uncertainties.
In new core CPI projections, comparing with October forecasts, and exclude effect of sales tax hike:
- Fiscal 2018 is revised to 0.8% to 0.9% (median 0.8%), down from 0.9% to 1.0% (median 0.9%).
- Fiscal 2019 is revised to 0.8% to 1.1% (median 0.9%), down sharply from 1.3 to 1.5% (median 1.4%).
- Fiscal 2020 is revised to 1.2% to 1.4% (median 1.4%) down from 1.4% to 1.6% (median 1.5%).
The downside revision in fiscal 2019 core CPI is rather steep.
EU Moscovici: Brexit has to be dealt with in London first
European Commissioner for Economic and Financial Affairs Pierre Moscovici reiterated the EU’s stance that regarding Brexit, the ball is in UK’s court now. He said “Certainly the EU is there, the EU is waiting, the EU is ready but first we need to know clearly what are the British intentions and we need some clarifications from London”.
He added that “Of course the door is always open for discussion but it’s not up to us to tell now the British side where it wants to go. The ball clearly is in the British side again. It’s not a problem that can be solved by Brussels, maybe in Brussels later, but it has to be first dealt with in London.”
Also on the possibility of hard Brexit, Moscovici said “Nobody wants a no-deal (Brexit), that is clear. The British parliament doesn’t want a no-deal, the British government doesn’t want a no-deal, and the EU is not willing a no-deal, so we need to explore all options which are not a no-deal.”