THE TAKEAWAY: The BoJ decided at their March 7th meeting by unanimous vote, to keep the overnight cash rate at 0.1 per cent and to pursue aggressive easing to achieve their inflation target.
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The Bank of Japan held the overnight cash rate at 0.1 per cent at their March meeting, saying that whilst overseas economies remain in a phase of deceleration, there are signs of a pickup. In their statement, the Bank stated that the Japanese economy has stopped weakening, but will level off for the time being before gradually returning to a moderate recovery path.
Despite this outlook, policy makers still maintained that there remains a high level of uncertainty regarding Japan’s economy, identifying problem areas including European debt issues as well as the momentum of the U.S. recovery.
Price stability remains the basis for the Bank’s monetary policy with the aim being to achieve the 2 per cent target at the earliest possible time. As a result, the Bank of Japan said in its statement that it will pursue aggressive monetary easing through interest rates and asset purchases.
The Bank rejected a proposal to commence open ended asset purchases by a majority vote which saw the Yen gain against the US Dollar. The Japanese unit likewise moved higher against most of its major counterparts as policy makers kept the asset purchase fund at 76 trillion Yen, apparently preferring to wait for the incoming BoJ Governor Haruhiko Kuroda to take office before tinkering with the policy mix.