The Bank of Japan’s May statement on monetary policy is out, and it’s basically a big MAINTAIN on its ‘quantitative and qualitative easing’ (QQE) programme.
If anyone was anticipating the BoJ might take this opportunity to point out it is mindful of recent rises in government bond yields — and apparently some were expecting this sort of reassurance, possibly even tweaking maturities purchased — they would be disappointed. Equities traders just seemed relieved that their rally will continue.
However one member, Takahide Kiuchi, proposed the 2 per cent inflation target shift to a “medium to long term” and the new QQE plan itself be designated as “an intensive measure with a time frame of about two years”. Kiuchi’s proposal at this meeting was voted down by the other eight board members. The central bank has, however, already revealed that some members are concerned about the risks of its QQE plans hurting retail investors in Japanese government debt.
So, no changes and no explicit reference to watching JGB moves. Oh well. The last set of minutes did suggest that the current BoJ board isn’t keen on trumpeting its own awesomeness.
The BoJ does cautiously note that “some indicators suggest a rise in inflation expectations”, but also says “there remains a high degree of uncertainty concerning Japan’s economy”, along with Europe’s and the US’. Interestingly China, which was cited warmly a month ago for its gradual yet modest pick-up in growth, wasn’t mentioned in today’s statement.
As for the rest of the statement: guidance on its asset purchases was identical to its introduction on QQE — target monetary base expansion of Y60 to 70tn a year; increase JGBs at Y50tn a year and extend average maturity to seven years; and increase ETFs and J-REITs holdings at Y1tn and Y30bn respectively. While commercial paper and corporate bonds weren’t explicitly mentioned in the ‘introduction to QQE‘ on April 4, the BoJ was already purchasing these assets and so it doesn’t appear to be a departure from the existing schedule.
A couple of hours earlier, trade data for Japan came in rather less promising than had been hoped.
Exports rose, year-on-year, but not anywhere near enough to offset a big rise in imports — bringing the trade deficit to a record.
The weak yen cuts both ways, especially for a country that relies on energy imports.
Related links:
BOJ keeps policy on hold – Reuters
Assessing Abenomics – FT Alphaville
BoJ sees good things everywhere – FT Alphaville