Bank of Japan keeps its finger off the monetary lever
Is it really better to do nothing? The Bank of Japan (BOJ) decided to keep its current monetary policy intact at a key policy meeting ended Wednesday although inflation is slowing on the back of retreating oil prices.
The BOJ stuck with its plan to expand the nation’s monetary base at an annual pace of 80 trillion yen.
The central bank is acting as the point man in Japanese Prime Minister Shinzo Abe’s efforts to end two decades of economic stagnation. But analysts say BOJ Governor Haruhiko Kuroda’s target of achieving 2% inflation this year faces a tough hurdle now that the central bank’s key gauge for price gains is slipping to zero from the impact of cheap oil prices and the country’s continuing weak rebound from a recession.
Japan’s Jiji Press reported that eight of the BOJ Policy Board’s nine members voted hands off on the monetary front, including Yutaka Harada, who joined the central bank’s policy board late last month.
The only dissenting vote on Wednesday, according to Jiji, was again cast by Takahide Kiuchi, who has opposed the bank’s stance since late October, when the BOJ boosted its monetary stimulus to a record level.
In a statement following the meeting, the BOJ said that “Japan’s economy has continued its moderate recovery trend.” Based on the BOJ’s “tankan” a quarterly barometer of corporate sentiment released last week, the statement added: “Business sentiment has generally stayed at a favorable level.”
Although many analysts expect further easing by the BOJ by October in the face of current conditions, Kuroda hopes price gains will come as a result of faster wage growth, supply constraints and evidence that consumers and businesses are detecting stronger signs of inflation.
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