Japan: latest developments in monetary policy
Published 28 May 2014
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0.1 Detail
The Bank of Japan (BOJ) decided to keep its current monetary policy unchanged. It maintained its view that the economic was ‘moderately recovering’ pointing to stronger business capital investment figures and that other advanced economies were also recovering boosting demand for Japanese exports. The initial economic data following the consumption tax rise in April is within their forecasts.
The Government also released April’s trade data on 21 May. The trade deficit reduced to 808.8 bn Yen (£4.7bn) from 877.3 bn yen in April 2013. This was greater than market analysts had been expecting (646bn Yen deficit). By value exports and imports increased by 5.1% and by 3.4% respectively over the same period a year ago. By volume, exports rose 2.0% while imports fell 1.3%. Exports to China and the EU supported export growth while fewer fuel imports contributed to the slowdown in import growth.
0.2 Comment
The BOJ and Government Ministers are satisfied that the introduction of the consumption tax has passed smoothly. They believe that the trade deficit is likely to have reached its peak and should now start to reduce as exports pick up and nuclear power stations start to come back online
Governor Kuroda repeated his statement on 21 May that the BOJ will do anything necessary to reach its inflation target. While many analysts are calling for further monetary easing later this year, the BOJ seems increasingly confident that such a move is likely to be unnecessary at the current time. However, Governor Kuroda has stated he will do so if he judges it necessary.
0.3 Disclaimer
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