Bank of Japan monetary policy meeting concludes - policy unchanged

  • Keeps monetary policy steady
  • Maintains short-term interest rate target at -0.1 pct
  • Maintains 10-year JGB yield target around zero pct
  • Leaves unchanged pledge to buy JGBs more or less at current pace so its holdings increase at annual pace of around 80 trln yen
  • Extends deadline for loan programme aimed at boosting lending, supporting industries with growth potential
  • Debt buying for loan programme extended by 1 year

Updates to its outlook ... INFLATION:

  • Core CPI expected +1.5 pct in fy2017/18 vs +1.5 pct projected in November ... no change
  • Core CPI expected +1.7 pct in fy2018/19 vs +1.7 pct projected in November ... no change
  • Core CPI expected -0.2 pct in fy2016/17 vs -0.1 pct projected in November ... lowers forecast
  • Likely to see inflation reach 2 pct around fiscal 2018

Updates to its outlook ... GDP projections raised:

  • Revises up its estimate on Japan potential growth to around 0.5 pct from 0-0.5 pct
  • Real GDP expected +1.5 pct in fy2017/18 vs +1.3 pct projected in November
  • Real GDP expected +1.1 pct in fy2018/19 vs +0.9 pct projected in November
  • Real GDP expected +1.4 pct in fy2016/17 vs +1.0 pct projected in November
  • Uncertainty on overseas economies including US monetary policy, China, Brexit pose downside risks
  • If confidence in Japan fiscal sustainability falls, could cause uncertainty, leading to rise in long term yields
  • If confidence in Japan's fiscal policy improves, could be upside risk for economy
  • There is risk firms could be cautious about setting prices and wages
  • Moves in FX, other commodities pose both upside, downside risks to main scenario

BOJ Quarterly report: Japan economy continues moderate recovery trend

  • Quarterly report: Japan economy likely to expand moderately ahead
  • Risks to economy, prices tilted to downside
  • Momentum to achieve 2 pct price goal maintained but lacks strength
  • BOJ QQE with yield curve control until needed to stably achieve 2 pct inflation
  • BOJ will make policy adjustments as appropriate looking at econ, prices, financial conditions
  • Inflation expectations remain on weak note

Long story, short - BOJ is becoming more sanguine on its outlook for the economy, but no change to its forecasts for inflation except in the near term, where forecasts are for lower!