2018.07.3104:21:00UTC+00BoJ Retains Monetary Stimulus; Makes Policy Framework Flexible

The Bank of Japan retained its massive monetary stimulus on Tuesday and announced its plan to conduct asset purchases and market operations in a flexible manner.

Introducing its forward guidance, the bank said it intends to maintain the current extremely low levels of short and long-term interest rates for an extended period of time.

The bank will continue to purchase government bonds so that the yield on the 10-year Japanese government bonds remains at around zero percent. However, the bank said, "while doing so, the yields may move upward and downward to some extent mainly depending on developments in economic activity and prices."

The BoJ is set to conduct purchases of Japanese government bonds in a flexible manner so that the outstanding amount will increase at an annual pace of about JPY 80 trillion.

As widely expected, the BoJ board retained the -0.1 percent interest rate on current accounts that financial institutions maintain at the bank.

The amount of each exchange-traded funds purchase will be revised and ETFs, which track the Tokyo Stock Price Index (TOPIX) will be increased.

Further, the bank said inflation is likely to take more time than expected to achieve the price stability target of 2 percent. The inflation outlook was downgraded, while maintaining growth projections.

The inflation forecast for fiscal 2018 was trimmed to 1.1 percent from 1.3 percent. Likewise, the projection for fiscal 2019 was lowered to 1.5 percent from 1.8 percent and that for 2020 to 1.6 percent from 1.8 percent.

At the same time, the bank maintained its growth forecast for both fiscal 2019 and fiscal 2020 at 0.8 percent.