Members of the Bank of Japan’s monetary policy meeting noted that the country’s economic recovery continues at a satisfactory pace, minutes from the central bank’s November 18-19 meeting revealed on Thursday.
The board said that weakness from commodity-exporting economies continue to be the primary downside risk.
The members added noted that capex is increasing as industrial profits continue to improve.
“Against the background of steady improvement in the employment and income situation, private consumption has been resilient and housing investment has been picking up. Public investment has entered a moderate declining trend, although it remains at a high level,” the minutes said.
At the meeting, the board voted to maintain its target of raising the monetary base at an annual pace of about 80 trillion yen. It also decided to leave its benchmark lending rate unchanged at 0 to 0.10 percent.
Takahide Kiuchi was the sole dissenter today. He proposed to raise the monetary base and the amount outstanding amount of Japanese government bonds be raised at an annual pace of about JPY 45 trillion instead of JPY 80 trillion.
“Overseas economies – mainly advanced economies — have continued to grow at a moderate pace, despite the slowdown in emerging economies. Exports and industrial production have recently been more or less flat, due mainly to the effects of the slowdown in emerging economies,” the minutes said.
The central bank opted to hold fire even though the country appeared to have slipped back into recession when the meeting was held – although GDP was later revised sharply higher to avoid that fate.
Japan’s GDP was revised up to 1.0 percent on year in the third quarter of 2015 – up sharply from November’s preliminary reading that suggested a contraction of 0.8 percent.
On a quarterly basis, GDP expanded 0.3 percent after the preliminary reading called for a decline of 0.2 percent, which was unchanged from the second quarter.
“Quantitative and qualitative monetary easing (QQE) has been exerting its intended effects, and the Bank will continue with QQE, aiming to achieve the price stability target of 2 percent, as long as it is necessary for maintaining that target in a stable manner. It will examine both upside and downside risks to economic activity and prices, and make adjustments as appropriate,” the minutes said.
Steady inflation allowed the bank to refrain from action, with lower energy prices rendering the central bank’s CPI target of 2 percent all but impossible.
Japan’s overall consumer price index climbed 0.3 percent on year in October, in line with expectations – while core inflation dipped 0.1 percent.
At the October meeting, the bank had downgraded its growth outlook and postponed the timing to achieve its 2 percent inflation target by six months.
Producer prices were up 0.5 percent on year in October, following the downwardly revised 0.5 percent increase in September (originally 0.6 percent).
On a monthly basis, producer prices added 0.1 percent after easing 0.2 percent in the previous month.
“Inflation expectations appear to be rising on the whole from a somewhat longer-term perspective, although some indicators have recently shown relatively weak developments. With regard to the outlook, Japan’s economy is expected to continue recovering moderately. The year-on-year rate of change in the CPI is likely to be about 0 percent for the time being, due to the effects of the decline in energy prices,” the minutes said.
The material has been provided by InstaForex Company – www.instaforex.com