World Economic outlook - how will Japan GDP 2013 : The Bank of Japan's monthly monetary policy meeting concluded today with no change in its policy of "aggressive monetary easing" – which it reserves the right to continue "as long as the bank judges it appropriate".
The decision comes as new economic data revealed a small but unexpected contraction in Japanese GDP in the fourth quarter of 2012, although monthly indicators and surveys suggest the economy has begun to pick up in the opening weeks of 2013.
The decision comes as new economic data revealed a small but unexpected contraction in Japanese GDP in the fourth quarter of 2012, although monthly indicators and surveys suggest the economy has begun to pick up in the opening weeks of 2013.
The Bank of Japan (BoJ) on January 22 doubled its target inflation rate, as part of a new strategy aimed at more actively boosting economic activity in the country, something promised by the country's new prime minister, Shinzo Abe.
Capital Economics says it will not change its GDP growth forecasts of 0.9% for calendar year 2013 and 1.1% for 2014 following the release of the latest data. While GDP fell by 0.1% in the fourth quarter of 2012, the consultancy's chief global economist Julian Jessop points to an upward trend in machinery orders, and surveys of business conditions and consumer confidence that he says "have also improved across the board".
Researchers at Barclays went one step further, revising their forecast upwards to predict GDP growth of 1.2% in 2013, citing yen depreciation and the implementation of economic stimulus measures among the factors behind their optimism.
BoJ board member Ryuzo Miyao once more argued that the virtually zero interest rate policy should be kept in place "until the bank judges the achievement of the price stability target to be in sight", but this proposal was opposed by all eight of the other board members, who preferred to keep the looser language of holding rates as long as they deem appropriate.
Grant Lewis, head of research at Daiwa Capital Markets, tells Centralbanking.com the difference in the two formulations is "fairly small", but what was agreed gives the BoJ "more wiggle room" compared with Miyao's suggested form of words, which "would tie their hands so as not to move rates until their forecast shows inflation rising to 2%".
Capital Economics' Jessop says it is not immediately obvious what Miyao's proposal would have added but that "tweaks to the guidance language are one of the changes that we should expect in the coming months after the new leadership team takes over at the bank".
Current governor Masaaki Shirakawa will step down from his post alongside the central bank's two deputy governors on March 19, with a replacement yet to be announced.
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