Bank of Japan Monetary Policy Minutes : おはようございます。

The Bank of Japan announced Tuesday night that it was keeping its monetary policy steady, and reported its price and economic forecasts unchanged.

The 2018 outlook for the Japanese economy is the grow at a moderate pace with both corporate and household demand strong. All being supported by the highly accommodated financial conditions present in the Japanese economy and albeit the worldwide economy.

Taking advantage of the accommodative economic conditions, Business fixed investment is forecasted to grow steadily, with the added increase in Olympic-related investments.

Moreover, Labor-saving investments that will be employed to address labor-shortages will be an added tailwind to investment spending in 2018.

Private consumption is expected to increase moderately with the aforementioned labor-shortages being addressed and thereby putting more money in consumers pockets to spend.

Public investment is seen to remain at a relatively high levels given the Olympic Games-related investments. However, it’s important to note that the effects of the BoJ’s last stimulus measures will have a diminishing impact to the economy.

With advanced economies propelling further growth in emerging economies , exports are seen to sustain an increasing trend. However, keep this chart in mind.

With that in mind, looking ahead to 2019, the BoJ is expecting their economy to continue to expand driven by “external” demand,nonetheless a projected declaration in the domestic demand could put brakes on the Bull Market is Asia.

The BoJ suspects Business-Fixed Investment to contract after the Olympic-Games related spending “peaks out”. Moreover, they cite the slowdown in domestic demand can be attributed to cyclical capital stock adjustments after a sustained economic expansion to be warranted.

The central bank forecast the economy to grow 1.4 percent in the fiscal year starting in April, with inflation of 1.4 percent over the same period.

Board members’ inflation forecasts. Arrows indicate upside, downside risk to forecast. Circles mean risks balanced.

With the economy growing and inflation slowly but steadily rising, some investors had started to bet that the BOJ is nearing the point where it begins to normalize its ultra-loose monetary policy. The yen gained strength after the BOJ cut its bond purchases earlier this month. –Toru Fujioka and Masahiro Hidaka

Following are comments from BOJ Governor Haruhiko Kuroda at his post-meeting news conference:

“Japan’s economy is expanding moderately but inflation remains weak. Other countries are facing similar situations but unlike these countries, many of whom are seeing inflation move around 1.5 percent, inflation excluding energy costs is barely above zero percent in Japan.

“There is still some distance to 2 percent inflation, so we’re in no condition yet to debate the timing of an exit from ultra-easy monetary policy.

“There is absolutely no need to adjust our yield targets just because we revised up our assessment on inflation expectations.” (On the BOJ’s decision to revise up its assessment on inflation expectations)

“For Japan’s economy, it’s important for the BOJ to patiently continue with powerful monetary easing. (When asked whether the BOJ could slow its purchases of exchange-traded funds. (ETF)

“Our ETF buying is one aspect of our monetary policy framework, and has had a positive impact on the economy and prices by pushing down risk premiums. The purchases have played a big role.

“So far, we’re not seeing any signs investors are becoming excessively bullish on stock prices. There is also no big problem in terms of corporate governance. There is no need to review our ETF purchases now.

Japanese government bond prices edged up on Tuesday after the Bank of Japan kept its monetary policy on hold and largely maintained its economic projections, dropping no hint of a possible exit from its stimulus.

The 10-year JGB futures price rose 0.10 point to 150.47 while the benchmark cash 10-year JGB yield dipped 0.5 basis point to 0.070 percent, slipping further from a six-month high of 0.090 percent set on Thursday.

The 20-year JGBs were also well-bid, with their yield inching down 0.5 basis point to 0.585 percent.

Other maturities were mostly flat, with the five-year yield at minus 0.085 percent and 30-year at 0.820 percent.

The BOJ kept monetary settings unchanged and stuck to its growth

and inflation forecast. -Reuters

Source: Reuters

Bloomberg

WSJ

Bank of Japan

-R.W.N II

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