Members of the Bank of Japan said that the Japanese economy is likely to remain on an upward trend, minutes from the bank’s March 8-9 meeting revealed on Monday.
“Domestic demand is likely to follow an uptrend, with a virtuous cycle from income to spending being maintained in both the corporate and household sectors, on the back of highly accommodative financial conditions and underpinnings through the government’s past stimulus measures,” the minutes said.
Among the downside risks to the consistency of the economy recovery would be unexpected policy moves from the United States, as well as the confusion surrounding the United Kingdom’s exit from the European Union.
However, annual inflation is expected to remain on an upward trend as it approaches the target of 2 percent.
“The year-on-year rate of change in the CPI is likely to continue on an uptrend and increase toward 2 percent, mainly on the back of an improvement in the output gap and a rise in medium- to long-term inflation expectations,” the minutes said.
At the meeting, the board decided to maintain the -0.1 percent interest rate on current accounts that financial institutions maintain at the bank.
Also, the bank will hold its target of raising the amount of outstanding JGB holdings at an annual pace of about JPY 80 trillion. The bank will purchase government bonds so that the yield of 10-year JGBs will remain at around zero percent.
“The bank will make policy adjustments as appropriate, taking account of developments in economic activity and prices as well as financial conditions, with a view to maintaining the momentum toward achieving the price stability target,” the minutes said.