TOKYO — The Bank of Japan stuck with its monetary stimulus program on Wednesday, brushing off a lack of inflation two years after it vowed to pull the economy out of more than a decade of falling prices.
As its initial deadline for stoking inflation passed, the central bank maintained that consumer prices were temporarily depressed by cheaper oil, and would gradually rise as consumers and businesses spent more and the economy recovered further.
The Bank of Japan has been buying bonds and other assets furiously since April 2013 to increase base money — or cash and deposits at the central bank — by 80 trillion yen, or $667 billion, a year, expanding its balance sheet by an amount equal to the size of Australia’s economy.
But it appears no closer to hitting its target of 2 percent inflation in about two years, part of its promise to pull the Japanese economy out of decades of deflation and spiritless performance. After the bank’s widely expected decision to hold firm on policy, the central bank’s governor, Haruhiko Kuroda, stuck to his guns.
“The broad trend in prices is steadily improving,” he told reporters at a conference. “There’s no change to our stance of aiming to achieve 2 percent inflation at the earliest date possible, with a time frame of two years in mind.” Mr. Kuroda reiterated that the slack was largely gone from the economy while the public expected prices to rise, which would occur after the effect of low oil prices waned.
Some market players had speculated that the bank might expand its program on Wednesday after inflation ground to a halt and consumer spending remained disappointingly weak.
Expectations that the Bank of Japan might still act at its next meeting, on April 30, helped Japan’s Nikkei stock average hit a 15-year high. Not all of the central bank’s nine board members share Mr. Kuroda’s conviction about the feasibility of maintaining, let alone expanding, the asset-buying program.
Some doubt whether more asset purchases will give any meaningful lift to economic activity, pointing to a lack of a clear pickup in capital expenditure. One board member, Takahide Kiuchi, who has expressed concerns that money printing could eventually lead to a bubble, called for the Bank of Japan to cut back its asset buying.
He proposed reducing the base money target and the annual pace of increase in the central bank’s government bond holdings. The proposal was rejected in an 8-to-1 vote. Financial markets are focusing on the April 30 meeting, when the board will review its long-term projections and may further cut its inflation forecast.
When it began the stimulus program in April 2013, the Bank of Japan pledged to achieve 2 percent inflation in about two years in a country mired in 15 years of deflation. The bank now says inflation will hit 2 percent around the ending of this fiscal year, in March 2016.
nytimes.com
As its initial deadline for stoking inflation passed, the central bank maintained that consumer prices were temporarily depressed by cheaper oil, and would gradually rise as consumers and businesses spent more and the economy recovered further.
The Bank of Japan has been buying bonds and other assets furiously since April 2013 to increase base money — or cash and deposits at the central bank — by 80 trillion yen, or $667 billion, a year, expanding its balance sheet by an amount equal to the size of Australia’s economy.
But it appears no closer to hitting its target of 2 percent inflation in about two years, part of its promise to pull the Japanese economy out of decades of deflation and spiritless performance. After the bank’s widely expected decision to hold firm on policy, the central bank’s governor, Haruhiko Kuroda, stuck to his guns.
“The broad trend in prices is steadily improving,” he told reporters at a conference. “There’s no change to our stance of aiming to achieve 2 percent inflation at the earliest date possible, with a time frame of two years in mind.” Mr. Kuroda reiterated that the slack was largely gone from the economy while the public expected prices to rise, which would occur after the effect of low oil prices waned.
Some market players had speculated that the bank might expand its program on Wednesday after inflation ground to a halt and consumer spending remained disappointingly weak.
Expectations that the Bank of Japan might still act at its next meeting, on April 30, helped Japan’s Nikkei stock average hit a 15-year high. Not all of the central bank’s nine board members share Mr. Kuroda’s conviction about the feasibility of maintaining, let alone expanding, the asset-buying program.
Some doubt whether more asset purchases will give any meaningful lift to economic activity, pointing to a lack of a clear pickup in capital expenditure. One board member, Takahide Kiuchi, who has expressed concerns that money printing could eventually lead to a bubble, called for the Bank of Japan to cut back its asset buying.
He proposed reducing the base money target and the annual pace of increase in the central bank’s government bond holdings. The proposal was rejected in an 8-to-1 vote. Financial markets are focusing on the April 30 meeting, when the board will review its long-term projections and may further cut its inflation forecast.
When it began the stimulus program in April 2013, the Bank of Japan pledged to achieve 2 percent inflation in about two years in a country mired in 15 years of deflation. The bank now says inflation will hit 2 percent around the ending of this fiscal year, in March 2016.
nytimes.com
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