After its last monetary policy meeting in late October, we described the Bank of Japan as one of the most boring central banks in the world.
Eight weeks on, nothing much has changed.
Yet again, it left monetary policy unchanged following the conclusion of its December monetary policy meeting, scuppering speculation that it may decide to tweak its asset purchase program.
Voting eight to one, the board retained 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 at around 0%.
It repeated that it would buy JGBs at an annual pace of around 80 trillion yen, adding that 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 10-year yields have been steady around 0% even with significantly lower asset purchases from the BoJ, some had speculated that the bank may drop its reference to an annual target.
Goushi Kataoka, a recent appointment to the BoJ board, was the only member to dissent, arguing that additional monetary policy easing was necessary given persistently low inflationary pressures and the risk of an economic downturn in the United States.
As opposed to the vote on the QQE with YCC program, 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 bank kept is assessment on the Japanese economy unchanged, noting that it was “expanding moderately”.
It made upgrades to its assessment on capital expenditure and consumption but downgraded its view on government investment.
There has been no reaction in financial markets to the decision.
You can read the full monetary policy statement here.