Debating the Practical Constraints of BoJ Policy

Economic Research	29 July 2016
Japan
Economic Highlights
Debating the Practical Constraints of BoJ Policy The Bank of Japan (BoJ) concluded its two-day meeting with additional monetary easing, directionally in-line with the consensus majority and our expectations.  But the breadth of the new BoJ announcement today--concentrated on the expansion of exchange-traded funds (ETFs) to “about” JPY6tn annually from around JPY3.3tn previously (with a 7-2 majority)--was less extensive than consensus expectations.  The decision to maintain the current pace of Japanese government bond (JGB) purchases at roughly JPY80tn and preserve the annual accumulation rate in Japan real estate investment trusts (J-REITs) at around JPY90bn, however, did not astound us.  But the decision to leave the policy rate unchanged at -0.1% (with the same majority vote of 7-2 as in prior meetings) was a surprising outcome.  The other details on the new “enhancement of monetary easing” from the BoJ, which consist of enlarging the US Dollar loan program (to $24bn from $12bn) and introducing a new securities lending facility, seem generally inclined toward potential market liquidity and funding risks along with fostering improved market functioning… Economist:  Thomas Lam  | +65 6533 0389
To access our recent reports please click on the links below: 28 July: Still Hanging on the Fence… 11 July: Yes, No, Maybe… 08 July: Diluting, Not Extinguishing, Rate Hike Expectations 05 July: Special Report: Elevating the Debate on Fiscal Policy… 27 June: Post-Brexit: Guesses & Speculations… 21 June: Gauging the Pulse of the Economy… 16 June: There’s still a Chance…