The Bank of Japan has applied an interest rate of -0.1 per cent and decided to leave its Japanese government bond buying program unchanged at its 1 November monetary policy meeting.
Japan’s economy is expected to continue “growing at a pace above its potential” on the back of accommodative financial conditions and government fiscal stimulus measures, the Bank said.
“Japan's economy has continued its moderate recovery trend, although exports and production have been sluggish due mainly to the effects of the slowdown in emerging economies,” the Bank said.
“Overseas economies have continued to grow at a moderate pace, but the pace of growth has somewhat decelerated, mainly in emerging economies.”
The Bank said it would continue with its quantitative and qualitative easing program (QQE) and yield curve control until it reached “the price stability target of 2 per cent, as long as it is necessary for maintaining that target in a stable manner”.
Commenting on the decision, Aberdeen Asset Management investment manager Michael Moen said it was unsurprising the Bank “chose to stay on the sidelines”, but said the updated growth and inflation forecasts showed the Banks’ “level of concern [is] rising”.
“Risks for growth and inflation are now seen to be skewed to the downside, and for the fourth time since QQE began back in 2013, the Bank of Japan has had to push out the timing of reaching the 2 per cent inflation target,” he said.
“The strength in the labour market and higher energy prices will buy the Bank some time, but inevitably falling inflation expectations and slowing underlying inflation will lead to further easing by mid-2017.”