- Removes reference from statement that it currently buys about 6 trillion yen of JGBs per month
- At the March 18 decision, the BOJ hiked rates for the first time in 17 years
- Vote was 9-0
- Prior vote was 7-2
- Rates left at around 0-0.10%
- Risks to the economy are generally balanced
- There are extremely high uncertainties on Japan’s economic and price outlook
- Japan’s economy has recovered moderately although there is some weakness
- Output gap improving, likely to gradually expand]
- Medium and long term inflation expectations heightened moderately
- Financial conditions have been accommodative
- More firms starting to pass on rising wages to sales prices
- Expect positive cycle of rising wages and inflation to continue
- Vigilance needed for currency and market movements and their impact on the economy and prices
- Consumption likely to gradually increase
- Expect accommodative monetary conditions to continue for the time being
- Full quarterly statement
There was a report earlier that the BOJ could consider measures to reduce its government bond purchases, though the report didn’t say when they might do that.
New forecasts (prior round was in Jan):
GDP:
- FY2024 +0.8% vs 1.2% prior — consensus +0.9%
- FY 2025 +1.0% vs 1.0% prior — consensus +1.0%
- FY 2026 (initial forecast): +1.0%
CPI ex fresh food:
- FY2024 2.8% vs 2.4% prior — consensus +2.3%
- FY2025 1.9% vs 1.8% prior — consensus +1.8%
- FY2026 (initial forecast): +%1.9
CPI ex fresh food and energy:
- FY2024 1.9% vs 1.9% prior — consensus +1.9%
- FY2025 vs 1.9% prior — consensus +1.8%
- FY2026 (initial forecast): %
There was some talk of higher CPI ex fresh food forecasts, in part due to rising oil prices so that’s not a huge surprise.
The yen is at a new 34 year low in the aftermath of the decision, rising to 155.81 from 155.55 just beforehand. I’d attribute that to the lack of any action or strong hints of action on rates, though I’m curious to see how the bond buying evolves.
The BOJ said that over the medium to long term, underlying inflation is expected to rise gradually due to improvements in the output gap and increasing inflation expectations, supported by a strengthening cycle of wage and price growth. The baseline scenario includes the above forecasts and said:
As for the conduct of monetary policy, it will depend on future developments in economic activity and prices as well as financial conditions. Uncertainties surrounding these economic and financial developments at home and abroad remain high. If the aforementioned outlook for economic activity and prices will be realized and underlying inflation will increase, the Bank will adjust the degree of monetary accommodation, while it anticipates that accommodative financial conditions will be maintained for the time being. With the price stability target of 2 percent, the Bank will conduct monetary policy as appropriate, in response to developments in economic activity and prices as well as financial conditions, from the perspective of sustainable and stable achievement of the target.
There was some thought there would be a stronger signal here, especially regarding timing.