Japan pursues two per cent inflation within two years

Bank of Japan governor Haruhiko Kuroda's first policy-setting meeting confirmed that the bank will pursue an inflation rate of two per cent within two years. Kuroda has previously stated that he will do "whatever it takes" to see this happen, although many think such a target is unrealistic.

  • The Bank shifted its monetary policy target to the monetary base from the overnight call rate, which is set at a range of zero to 0.1 per cent.
  • Money-market operations will continue so that the monetary base will increase at an annual pace of about 60 trillion yen to 70 trillion yen.
  • Combined two bond-buying schemes, its asset-buying and lending programme and the "rinban" bond-buying market operation, to buy government bonds across the yield curve including those with duration of 40 years.
  • The Bank will revert to open-ended asset purchases and buy over seven trillion yen of long-term government bonds per month, so that the balance of its bond holdings increase at an annual pace of 50 trillion yen.
  • The Bank will increase purchases of exchange-traded funds (ETF) by one trillion yen per year and real-estate trust funds (REIT) by 30 billion yen per year.

Yen weakened significantly against the dollar as a result and 10-year bond yields fell to a decade low.

(Source: Yahoo! Finance)