BoJ Keep Stands Pat, Cuts Growth

The Bank of Japan kept monetary policy steady on Thursday but cut its assessment on exports and output as companies feel the pinch from slowing global growth, signaling its readiness to expand stimulus again if risks to the outlook grow.

BOJ Governor Masaaki Shirakawa warned that while he still expects exports to recover over time, the fallout from Europe’s debt crisis was broadening and may delay a pickup in key markets for Japanese goods like the United States and China.

“Europe’s sovereign debt woes are already having a huge impact on the global economy. If the situation worsens further, it could trigger market turmoil or further cool global growth,” he told a news conference.

However, Shirakawa gave few clues on when the BOJ could next ease policy, and ruled out an idea floated by a new board member that the central bank should buy foreign bonds.

“If the BOJ were to buy foreign bonds for the purpose of reversing yen rises or weakening the yen, that would be equivalent to currency intervention,” which falls under the jurisdiction of the government, he said.

As widely expected, the central bank refrained from topping up the 70 trillion yen ($890 billion) target for its asset buying and loan program.

Pressure for immediate action has eased with the yen having barely moved after last week’s better-than-expected U.S. jobs data, as well as decisions by the Federal Reserve and the European Central Bank to keep policy steady for now.

Newly appointed members Takehiro Sato and Takahide Kiuchi joined the policy debate, bringing the nine-member board to full force for the first time since early April.

Both of them, formerly prominent economists, have argued that the BOJ’s price forecasts are too optimistic and that there was more the bank can do, such as purchase foreign bonds.


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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell