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Japan Monetary Easing to Continue

Japan Monetary Easing to ContinueJapan Monetary Easing to Continue

The Bank of Japan's deputy governor, Kikuo Iwata, speaking to reporters last week said that the central bank must continue with its massive quantitative easing program in order to guide inflation from the current near-zero percent to the 2% target.

He said that it was therefore too early to reduce the monetary policy program or raise interest rates. The BoJ held its monetary policy meeting few weeks ago and refrained from making any changes to its QQE or interest rates which remains at -0.10%, investing.com reported. 

"There is still a long way to go to achieve the price stability target of 2% in Japan," Iwata said, extinguishing any hopes from the markets that the BoJ would begin to taper its monetary easing.

The BoJ had switched towards controlling both the lower end and the longer term bond yields, in an effort to keep the short-term interest rates near zero, while controlling the yields on the longer date bonds.

Iwata said that monetary policy easing was still required in Japan as the central bank has the mandate for price stability, targeting 2% inflation rate. He said that it was not the time to remove the current accommodative monetary policy.

Speaking on the economy, the BoJ official said that there was still a long way to go. He said that there is evidence of a modest recovery in the economy but that the central bank needs more time so that the recovery is more firm. However, he said that it was concerning that the momentum in inflation continues to remain weak.

Iwata said: Risks have continued to be skewed to the downside, particularly those regarding developments in overseas economies and in firms' and households' medium- to long-term inflation expectations.

Japan Q1 GDP rises 0.3% q/q. Latest growth numbers showed that Japan's economy grew at a slower than expected pace in the first quarter this year. According to data from the cabinet office, Japan's GDP expanded just 0.3% in the quarter ending March 2017. This was revised down from 0.5% initially and was below forecasts of a 0.6% increase.

On a year over year basis, Japan's GDP was just 1%, marking a sharp decline from the 2.2% increase registered in the previous year. Despite the weak quarterly GDP numbers, the data showed that Japan's economy expanded for five straight quarters so far. It was the longest uninterrupted pace of expansion in the economy.

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