Friday, October 4, 2013
DJ: BOJ Maintains Key Policy Of Expanding Monetary Base By Y60tln-Y70tln Per Year
TOKYO--The Bank of Japan on Friday left its monetary policy unchanged for the seventh consecutive time, citing an ongoing economic recovery, but noted concerns looming ahead, including those about global growth and the impact of a sales tax hike next April.
The absence of fresh action from the BOJ's policy board was widely expected. It was the first meeting since Prime Minister Shinzo Abe announced this week he would go ahead with a planned increase in the sales tax to 8% from 5%.
Six months after the central bank initiated its aggressive monetary easing policy, prices are rising and corporate sentiment has improved to the levels seen prior to the financial crisis that began in 2008. That has given the BOJ breathing space to gauge the effects of its measures.
Following the two-day meeting, the nine-member policy board unanimously decided to keep the amount of money it pumps into the economy at Y60 trillion-Y70 trillion a year.
The BOJ also maintained its upbeat assessment of the economy, saying it is "recovering moderately," the same phrase it used last month. It upgraded its assessment of corporate capital spending, saying it has been picking up as corporate profits have improved.
The BOJ's closely watched quarterly tankan survey released Tuesday showed business sentiment among big firms was at its highest level since the 2008 global financial crisis. And after 15 years of deflation, consumer prices have begun creeping upward, with the key index excluding volatile fresh food prices rising 0.8% in August from the same month a year earlier. It was the third straight month of rises.
But the central bank is worried about developments in overseas economies, whose recovery is vital for a further recovery in Japan's economy. In a statement issued after the policy meeting, the BOJ cited the European debt problem, emerging economies, and the pace of the U.S. recovery as risks to Japan.
Another concern is the ongoing impasse in the U.S. over debt negotiations that has forced the U.S. government to partially shut down since Oct 1. European Central Bank President Mario Draghi warned Wednesday that the U.S. government shutdown could threaten economic recoveries in the U.S. and around the world.
BOJ Gov. Haruhiko Kuroda will likely welcome Mr. Abe's announcement Tuesday that he will raise the sales tax. Mr. Kuroda had warned that putting off the move could undermine investor confidence in Japan's fiscal policy and cause a spike in long-term rates.
Mr. Kuroda has said the economy can withstand the effects of the tax increase, and BOJ officials are intent on not taking action when the levy goes up. But private economists see a different scenario, expecting the central bank will be forced to adopt further easing measures to prevent a downturn in the economy.
A majority of economists surveyed by The Wall Street Journal said a planned Y5 trillion stimulus package that Mr. Abe has announced to accompany the tax decision won't be enough to offset the adverse effects of the tax increase, and they expect the BOJ to take action in April.
Board member Takahide Kiuchi, formerly an economist at Nomura Securities, again proposed at the policy meeting that the central bank's inflation commitment be made more flexible, signaling his hope to ensure stability in long-term interest rates, which turned more volatile after April's policy initiatives.
Mr. Kiuchi urged the rest of the board to characterize the 2% inflation target as something to be implemented in "the medium to long term," and to designate the current easing policy as "as an intensive measure with a time frame of about two years." His proposal was voted down 8-1.