Japan keeps monetary policy steady & continues battling Inflation

November 6, 2017

The Bank of Japan's monetary policy, the key interest rate was held steady at -0.10% while the central bank's QQE program was untouched.

Japan keeps monetary policy steady & continues battling Inflation

This article is originally referred from Orbex Market Recap

Last week, focus turned to Europe once again after the semi-autonomous region of Catalonia went ahead with its plans following the Catalonian referendum held on October 1.

The referendum which was deemed illegal by Spanish authorities saw the Catalonian parliament defy the authorities in Spain.

However, the Catalonian leader refrained from declaring independence but said that backed by the mandate he would prefer further dialogue with Spain. This helped to improve the sentiment in the euro currency for the moment.

Elsewhere, the economic calendar saw the FOMC meeting minutes being released.

BoJ keeps monetary policy steady. Inflation forecasts cut again

The Bank of Japan’s monetary policy held last week showed major changes.

The key interest rate was held steady at -0.10% while the central bank’s QQE program was untouched.

The central bank voted 8 – 1 keeping the QQE steady at 80 trillion yen. The central bank said that it will purchase government bonds in order to keep the yields on the 10-year bonds at around zero percent.

The BoJ’s newest member, Goushi Kataoka was the only dissenter. The said that a delay in timing of achieving the price stability target would mean that the central bank must take additional measures

The central bank also gave its inflation forecasts. It said that inflation was likely to continue on the uptrend and gradually rise to the 2% target. It expects the improvements to come on the back of an increase in the output gap and the rise in the medium term inflation expectations.

Inflation forecasts in Japan were lowered to 0.8% for 2017 and 1.4% for 2018. The central bank however raised the GDP forecasts to 1.9% for 2017 and 1.4% for the next year.

BoJ Tankan surveys shows an uptick in manufacturing

Over the weekend, the Bank of Japan released its quarterly Tankan manufacturing and nonmanufacturing survey results.

According to official data, the index monitoring the business sentiment in Japan showed an increase for third consecutive quarter ending Q3 2017.

The large manufacturer’s index came in at +22 which was higher than the expected +18 and increased from +17 from the previous quarter. The business outlook index was also higher at +19 which beat expectations of +16 and rising from +15 in the previous three months.

The data was seen as a positive development for the business outlook in Japan.

As a leading indicator an uptick in the manufacturing sector could potentially see this unfold into more jobs and potentially higher wages.

This is eventually expected to see inflation being pushed higher.

The BoJ is currently seen battling inflation which has remained low for decades.

Original Source: Orbex Market Recap

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