The Bank of Japan, in a 8-1 vote on Dec. 21, decided to maintain the policy rate at negative 0.1%, while voting unanimously on asset purchases.
The central bank said it will purchase Japanese government bonds, or JGBs, so that 10-year JGB yields will remain at about zero percent. It will conduct JGB purchases "at more or less the current pace" in order to hit the long-term interest rate target.
The BOJ also unanimously voted to buy exchange-traded funds and Japanese real estate investment trusts to increase their amounts outstanding annually by about ¥6 trillion and ¥90 billion, respectively. Meanwhile, the bank will maintain the amount of commercial paper and corporate bonds outstanding at roughly ¥2.2 trillion and ¥3.2 trillion, respectively.
The Japanese central bank expects the economy to maintain moderate growth, for domestic demand to climb and exports to continue their moderate rise. The country's consumer price index, or CPI, will likely continue to rise toward the 2% target, the BOJ added, supported by an improved output gap and increasing medium- to long-term inflation expectations.
Japan's core consumer prices, which exclude fresh food, rose by an annual 0.8% in October, while Japanese companies expect consumer prices to rise by an annual 1.1% three years from now and 1.1% five years ahead.
The BOJ said risks to the outlook include U.S. policies that affect the global financial markets, developments in emerging and commodity-exporting economies, Brexit negotiations, European debt and financial sector issues, and geopolitical uncertainties.
The central bank said it will continue with its monetary easing policy to achieve 2% inflation "as long as it is necessary for maintaining that target in a stable manner." It will also keep expanding the monetary base until the year-over-year rate of increase in the observed CPI increases past 2% and stays above target.
BOJ board member Goushi Kataoka, who has called for more monetary easing, was the sole dissenter on maintaining the policy rate, citing risk factors including the consumption tax hike and a possible U.S. economic slowdown that made it "desirable to achieve the price stability target in fiscal 2018."
As of Dec. 20, US$1 was equivalent to ¥113.32.
