‘Wages and the labor market are most closely linked to consumer prices. The labor market has tightened even further, so I think the BOJ wanted to highlight that point by upgrading its assessment on consumer spending.’ — Hiroshi Miyazaki, Mitsubishi UFJ Morgan Stanley Securities
The Bank of Japan left its monetary policy and interest rates unchanged at its meeting on Friday but expressed optimism over the economic outlook for the domestic economy and its export sector. As expected, policymakers voted to keep the Bank’s short-term interest rates at -0.1% and the yield on the 10-year Japanese government bond around zero. Moreover, the Central bank left the balance of its holdings increases at an annual pace of 80T yen ($729.33B). The BoJ’s meeting followed the US Federal Reserve’s meeting, at which US policymakers raised interest rates for the second time this year, predicted one more rate hike in 2017 and outlined a plan for shrinking the Bank’s balance sheet. The BoJ pointed to low private consumption and attributed its weakness to subdued inflation growth. The Bank said that overseas economies, including emerging ones, continued expanding at a moderate pace. As to the domestic economy, the Bank said that the economy was stepping on a path of a moderate expansion. The BoJ is expected to remain on hold until it sees some improvement in inflation.
