The Bank of Japan just held a two-day policy meeting and changed next to nothing

  • The Bank of Japan held monetary policy steady in March, as expected.
  • It refrained from dropping its annual purchase target for Japanese government bonds.
  • BoJ Governor Kuroda will speak shortly.

As other major central bank’s are tightening or moving towards lifting interest rates, the Bank of Japan (BoJ) remains content to sit on the sidelines, leaving monetary policy settings unchanged again in March.

As was the case when it met in January, the board voted eight to one to retain its quantitative and qualitative monetary easing (QQE) with yield curve control (YCC) program, keeping interest rates unchanged at -0.1% while pledging to buy Japanese government bonds (JGB) so that 10-year JGB yields will remain anchored around 0%.

Despite purchasing significantly lower amounts of Japanese government bonds (JGBs) in recent months, it retained its annual purchase target of around 80 trillion yen, adding it will “continue expanding the monetary base until the year-on-year rate of increase in the observed CPI exceeds 2% and stays above the target in a stable manner”.

Given recent stability in 10-year yields around 0%, even with significantly lower asset purchases, speculation continues to swirl that it may drop its reference to an annual purchase target.

Once again, that speculation went unfounded at this meeting.

Goushi Kataoka was yet again the only board member to dissent against the decision, arguing that the bank should purchase JGBs so that bonds with maturities 10-years or longer would “broadly be lowered further”.

More bond purchases, in other words.

Kataoka also described the possibility of CPI moving back towards the bank’s 2% target as “low at this point”.

Mirroring the outcome seen in January, the board voted unanimously to keep annual purchases of exchange traded funds, Japan real estate investment trusts and corporate paper and bonds unchanged at about 6 trillion yen, 90 billion yen and 5.4 trillion respectively.

In the accompanying monetary policy statement, the BoJ left its assessment of the Japanese economy unchanged, describing it as “expanding moderately”.

It did cut its assessment on housing investment, describing it as “weakening somewhat”.

There has been no market reaction to the decision, reflecting that investors saw it as highly unlikely that the BoJ would change policy at this meeting.

Attention will now turn to Governor Kuroda’s press conference that will begin at 3.30pm in Tokyo.

The BoJ March policy statement can be accessed here.