As anticipated, BoJ left its monetary policy unchanged today, maintaining its easing bias. Despite a rise in inflation expectations, CPI is projected to slow down during the current fiscal year before experiencing a moderate increase once again.
Under yield curve control, short-term policy rate was held at -0.10%. Long-term interest rate will remain at around 0% with necessary purchase of JGBs without an upper limit. The band for 10-year JGB yield to fluctuate stayed at plus and minus 0.5%.
BoJ maintained the pledge to continue with QQE with YCC for “as long as it is necessary”. It “will not hesitate to take additional easing measures if necessary”. It also expects “short- and long-term policy interest rates to remain at their present or lower levels”.
BoJ said the economy “has picked up” with exports and industrial production “more or less flat”. The economy is projected to “continue growing at a pace above its potential growth rate” as a virtuous cycle form income to spending intensifies gradually.
Inflation expectations “have risen”. But, CPI is “likely to decelerate toward the middle of fiscal 2023”, then “accelerate moderately” on the back of improvement in output gap, rises in medium- to long-term inflation expectations in wage growth, and waning down of energy prices measures.”
The meeting was the last one to be chaired by Governor Haruhiko Kuroda. Kazuo Ueda was approved by both houses of the parliament this week as the next BoJ Governor.