TOKYO – The Bank of Japan decided on Thursday to keep its major monetary policy measures unchanged and said that the Japanese economy continues its tend of moderate expansion, despite visible signs of slowdown outside the country.
At the end of its monthly two-day meeting, the BoJ decided to keep the short-term benchmark interest rate at -0.1 percent, the same it has been since 2016, for deposits by financial institutions.
It also kept intact its program of mass purchase of government bonds so that the yield of those who have a long-term 10-year bonds remains around 0 percent, as well as the program for buying financial assets in private hands, in both cases in a flexible manner.
These measures seek to keep inflation on track towards its target of 2 percent. Inflation at the end of 2018 in Japan was 0.9 percent, while in October it was 0.4 percent, compared to the same month in 2018.
BoJ stated that it would keep its monetary stimulus measures as long as necessary to reach the inflation target of close to 2 percent.
The official statement at the end of the meeting was in line with the analysis of previous months, noting that the Japanese economy remained in its trend of moderate expansion with a healthy circle of income and expenditure.
However, it continued to observe a slowdown in other economies and the export sector continued to experience some weakness, while industrial production has recently declined owing to natural disasters, among other things.
The statement claimed that this trend would continue, but expected an upward trend in domestic demand.
The BoJ has continued to perceive external risks such as increased trade protectionism and the consequences of Britain’s exit from the European Union.
This month’s meeting came after the authorities noted that household spending fell by 5.1 percent year-on-year in October – the biggest decline since March 2016 – and coincided with the increase in VAT from 8 to 10 percent.
October represented the first drop in the indicator in 11 months, and the most pronounced one since March 2016, according to official data.
In addition, it was reported last week that confidence in the evolution of the Japanese economy worsened in December from September, representing the fourth consecutive quarterly decline and placing the indicator at its worst level since April 2013.
Earlier this month, the Japanese government announced a stimulus package of 26 trillion yen ($239.1 billion) for the next three years to mitigate the negative effects of the tax hike and counter the expected fall in public spending following the Tokyo 2020 Olympic Games.