The Bank of Japan kept monetary policy steady and roughly maintained its ambitious price forecasts on Tuesday, pointing to signs of growing strength in the economy that policymakers hope will accelerate inflation toward its elusive 2 percent target.
Board newcomer Goushi Kataoka made no proposal on additional easing, defying market expectations he might do so after dissenting to last month’s BOJ decision to keep policy steady.
But he said the central bank should make clear its readiness to expand stimulus again and commit, via its bond purchases, to keeping the yield on longer-term bonds low.
“If there were a delay in the timing of achieving the price target due to domestic factors, the BOJ should take additional easing measures,” Kataoka said, according to a statement issued by the central bank.
As widely expected, the BOJ kept intact a pledge to guide short-term interest rates at minus 0.1 percent and the 10-year bond yield around zero percent by a 8-1 vote. Kataoka dissented to the decision to stand pat.
While not an official proposal for easing, Kataoka said the BOJ should buy government bonds so 15-year yields “remain at less than 0.2 percent”. The 15-year government bond yield stood around 0.307 percent on Tuesday.
“I don’t think Kataoka’s argument will sway the majority view of the board,” said Ryutaro Kono, chief economist at BNP Paribas Securities, noting the board felt no need for further easing as long as the economy kept recovering.
“That said, inflation is unlikely to accelerate beyond 1 percent in the near future. Therefore the BOJ is unlikely to head for an exit or ease policy further.”
Reference: Reuters
Read more: http://www.reuters.com/article/us-japan-economy-boj/boj-keeps-policy-steady-board-newcomer-signals-desire-for-easing-idUSKBN1D00AN
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