Statement on Monetary Policy
1. At the Monetary Policy Meeting held today, the Policy Board of the Bank of Japan decided on the following with regard to the guideline for money market operations and purchases of exchange-traded funds (ETFs) and Japan real estate investment trusts (J-REITs).
(1) Guideline for Money Market Operations
The Policy Board decided, by a unanimous vote, to set the following guideline for money market operations for the intermeeting period:
The Bank of Japan will encourage the uncollateralized overnight call rate to remain at around 0 to 0.1 percent.
(2) Purchases of ETFs and J-REITs
The Bank decided the principal terms and conditions governing operational details of purchases of ETFs and J-REITs, such as the specifics of those to be purchased and the method of purchase in which the Bank appoints a trust bank as trustee.
2. Japan's economy still shows signs of a moderate recovery, but the recovery seems to be pausing. Exports and production have recently been more or less flat. Business fixed investment is showing signs of picking up. The employment and income situation has remained severe, but the degree of severity has eased somewhat. As for private consumption, there has been a decline in durable consumer goods following the sharp increase in demand. Meanwhile, financial conditions have continued to show signs of easing. The CPI (excluding fresh food) are declining on a year-on-year basis due to the substantial slack in the economy as a whole, but the slowing trend in the pace of decline has continued.
3. The Bank's baseline scenario projects that Japan's economy is likely to grow at a slower pace for some time, but is expected to return to a moderate recovery path thereafter as the growth rate of the global economy is likely to start increasing again led by emerging and commodity-exporting economies. As for prices, the year-on-year rate of decline in the CPI is expected to continue slowing.
4. In the area of economic activity, there are some upside risks such as faster growth in emerging and commodity-exporting economies. However, amid continued heightened uncertainty about the future, especially for the U.S. economy, attention should also be paid to downside risks to Japan's economy. Regarding the outlook for prices, there is a possibility that inflation will rise more than expected due to an increase in commodity prices brought about by high growth rates in emerging and commodity-exporting economies, while there is also a risk that the rate of inflation will deviate downward from the baseline due, for example, to a decline in medium- to long-term inflation expectations.
5. Today's decision has established the framework for the Asset Purchase Program in total amount of 35 trillion yen that includes the purchases of risk assets. The Bank will purchase assets through the Program sequentially, starting with Japanese government bonds at the beginning of next week and followed by the purchases of other assets, so that the effects of comprehensive monetary easing will quickly spread.
6. For Japan's economy to overcome deflation and return to a sustainable growth path with price stability, the Bank will continue to consistently make contributions as the central bank by the three-pronged approach of pursuing powerful monetary easing through comprehensive monetary easing, ensuring financial market stability, and providing support in strengthening the foundations for economic growth. The Bank will continue to carefully examine the outlook for economic activity and prices, and take policy actions in an appropriate manner.