(Finance) – During today’s Monetary Policy Meeting (MPM), the Policy Board of Bank of Japan decided, by unanimous vote, to leave rates at the current accommodative levelor around 0-0.1%.
Regarding purchases of Japanese government bonds (JGBs), CPs and corporate bonds, the central bank will conduct purchases in accordance with decisions made at the March MPM 2024.
However, the BoJ decided, with a majority of 8 votes in favour, that will subsequently reduce the amount of JGB purchases to ensure that long-term interest rates are formed more freely in financial markets. The central bank will gather the views of market participants and, at the next MPM, decide on a detailed plan for reducing the purchase amount over the next one to two years or so.
On the price front, the year-on-year rate of increase in the index of consumer prices (CPI, all items less fresh foods) has recently been between 2 and 2.5%, as prices for services have continued to grow moderately, reflecting factors such as wage increases, although pass-through effects on consumer prices of cost increases driven by past increases in import prices have eased. Inflation expectations increased moderately.
The Bank of Japan expects the year-on-year rate of increase in the consumer price index (all commodities except fresh foods) to be pushed upward during fiscal 2025 from factors such as the waning of the effects of the government’s economic measures which push inflation downwards. Meanwhile, underlying inflation is expected to rise gradually, as the output gap is expected to improve and medium- and long-term inflation expectations are expected to rise with a virtuous cycle between wages and prices continuing to intensify.