Monetary policy in Japan: The Bank of Japan keeps printing money at speed

Posted: October 30, 2015 in economy
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INACTION may at first glance seem more timid than pulling out the monetary bazooka—but it took nerve for Haruhiko Kuroda to hold fire at the Bank of Japan’s monetary-policy meeting on October 30th. The central bank’s policy board, which Mr Kuroda effectively controls, voted 8-1 to maintain the existing programme of quantitative easing (QE, or printing money to buy bonds) at its current level of ¥80 trillion ($660 billion) a year. Given that Japan is officially back in mild deflation for the first time since 2013, when the BoJ began QE, it was a bold decision not to act. The BoJ’s mandate, after all, is to produce sustained inflation of 2%.But Mr Kuroda kept his faith in gradually recovering growth, and in a range of measures which, he believes, suggest robust underlying price rises. In July the central bank began publishing a new index of inflation, known as “new core CPI”, which strips out both the price of energy and of fresh food. It shows prices rising at a healthy pace. In August the new gauge rose by 1.1%, and in September by 1.2% (compared to falls in core CPI of -0.1% for both months).The BoJ duly highlighted the new index in its updated outlook for the economy and prices today. It slashed its forecast for CPI inflation (including energy) for fiscal 2015 from 0.7% to 0.1%, tweaked its prediction for fiscal 2016 and left unchanged its projection for fiscal …

via Economic Crisis


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