stands pat amid Trump uncertainties, raises growth outlook
The Bank of Japan decided to maintain its current drastic
monetary easing measures in a two-day meeting through Tuesday, with
uncertainty surrounding policies under U.S. President Donald Trump's
"America First" slogan shaking global financial markets.
The central bank, however, raised its outlook for domestic
economic growth for the upcoming fiscal years, as a U.S. recovery and
a falling yen have shored up exports and industrial production, while
keeping the inflation outlook unchanged.
BOJ Governor Haruhiko Kuroda said Japan's economy is on a
"moderate recovery track" but he expressed concern Trump's economic
policies which put emphasis on economic expansion in the United
States could hurt Japan's economy.
"As the U.S. economy has great effects on the global economy and
international financial markets, we are going to closely watch the
direction and the impact" of Trump's policies, Kuroda said at a press
conference after the policy meeting.
Kuroda said some BOJ policymakers have cited U.S. economic
developments as a "downside risk" to the global economy.
"In general, various policies based on protectionism are feared
to reduce world trade, decelerating global economic growth," Kuroda
On Tuesday, the BOJ decided by a 7-2 majority vote to leave
intact its 10-year Japanese government debt yield target at around
zero percent, as well as its negative interest rate of minus 0.1
percent for some reserve funds held by commercial banks at the
In its quarterly outlook report, the bank upgraded its real
economic growth projection for fiscal 2017 ending in March next year
to 1.5 percent from November's forecast of 1.3 percent, and for
fiscal 2018 to 1.1 percent from 0.9 percent.
"Comparing the current projections with the previous ones, the
projected growth rates are somewhat higher, mainly reflecting
improvement overseas and the yen's depreciation," the BOJ said in
As for prices, the central bank said Japan's core consumer price
index, excluding volatile fresh food prices, is forecast to rise 1.5
percent in fiscal 2017 and 1.7 percent in fiscal 2018.
The core CPI fell for the 10th straight month in December, down
0.2 percent from a year earlier, but the BOJ said it expects the
yen's slide will help push up import prices, driving up consumer
prices in Japan in the next fiscal year.
"The recent yen depreciation is likely to increase upward
pressure on prices after the turn of fiscal 2017," the BOJ said.
The BOJ added the central bank is expected to achieve its 2
percent inflation goal "around fiscal 2018."
The central bank's "yield curve control" policy, launched in
September, has contributed to curbing rises in Japan's long-term
With speculation mounting that the interest rate gap between
Japan and the United States will widen further, the yen has dropped
more than 10 percent against the U.S. dollar since Trump won the Nov.
8 U.S. presidential election.
BOJ Policy Board members gathered for the first time since Trump
was inaugurated as president on Jan. 20.
Some BOJ watchers have voiced concern Trump might begin to
criticize the Japanese central bank for intentionally devaluing the
yen, as he may seek a weaker dollar to boost U.S. exports under his
"America First" policy.
Trump said in an interview with The Wall Street Journal that the
dollar was too strong for U.S. companies to compete with rivals in
China, although he has not singled out Japan as a currency
manipulator so far.
Kuroda said, "Japan's monetary policy is aimed at stabilizing
prices and attaining a 2 percent inflation goal as soon as possible,
not targeting stability in foreign exchange rates."
"I believe many countries are sharing the view that foreign
exchange rates should reflect economic fundamentals," he said.
He added it is "too early" to start discussions about whether
the central bank should end years of aggressive monetary easing and
begin tapering the easing policy.
Given economic and price conditions in Japan, the BOJ is
unlikely to raise the 10-year government bond yield target "until
inflation expectations pick up" significantly, Naohiko Baba, chief
economist at Goldman Sachs Japan Co., said in a report.
At the latest meeting, the BOJ also decided to extend its
special lending support fund systems by one year, such as one to
provide lower-interest loans to banks that increase lending to
companies in specific sectors expected to grow in the future. (Jan. 31)
(Noriyuki Suzuki contributed to this report.)