The Bank of Japan reiterated its stance in its monthly update on monetary policy, saying that the Japanese economy is continuing to “recover moderately as a trend,” although it acknowledged that the country’s recent sales tax hike was having some effect on production.
The BOJ said that there was “some weakness particularly on the production side….due mainly to the effects of the subsequent decline in demand following the front-loaded increase prior to the consumption tax hike.”
Japan raised its sales tax for the first time in seventeen years in April, from 5 to 8 per cent, meaning people rushed out to buy cars, furniture and expensive items before it was implemented.
Otherwise, the BOJ added that private consumption “has remained resilient as a trend.” It maintained its 2 per cent inflation target.
Japan’s central-bank chief predicted victory in his battle to root out the deflation that has long sapped economic vitality in the world’s third-largest economy, but expressed impatience with the government’s pace in cutting red tape and encouraging businesses to invest more.
“Implementation is key, and implementation should be swift,” Bank of Japan Gov. Haruhiko Kuroda said in an interview with The Wall Street Journal. “The major work to be done is by the government and the private sector.”
Mr. Kuroda’s comments mark an important shift in tone more than a year after he was tapped by Japanese Prime Minister Shinzo Abe to engineer a newly aggressive monetary policy. The resulting “bazooka” of stimulus actions, including the purchase of trillions of yen in government bonds and other assets, has fueled Japan’s longest economic growth streak in nearly four years and a steady stream of positive inflation readings.>> Read More
The Bank of Japan’s press conference on April 8 was the first one to be broadcast live. Until recently, the BOJ did not allow the media to report on its latest monetary policy until the press conference ended. Asked whether he prepared for the live broadcast any differently, BOJ Gov. Haruhiko Kuroda stroked his sky blue necktie and said, “I did a little thinking about the color of my tie, that’s all.”
While his remark drew laughter, a rule of thumb has emerged over the last year regarding Kuroda’s choice of ties. As one BOJ official said, “It might better not to underestimate it.”
Red for dove, blue for bull
The BOJ decided to introduce an unprecedented level of monetary easing at its policy board meeting that ended on April 4, 2013. With his vivid red tie, Kuroda spoke confidently about the monetary easing, holding up cards showing the BOJ’s targets, including doubling its monetary base within the next two years. In the year since, he has maintained the stance that the central back will not take an incremental approach in its monetary policy.
The only exception is the bank’s February meeting this year. He was wearing a red tie, and while there was no additional easing, the BOJ did decide unexpectedly to double the scale of its two lending programs for financial institutions. This announcement improved lingering expectations for additional easing. The rule that Kuroda shows his dovish, pro-monetary easing side in a red tie has so far proven true.>> Read More