Japan's central bank keeps monetary easing policy

Japan's central bank decided on Tuesday to maintain its massive monetary easing program and to expand lending programs. After a two-day policy meeting, Bank of Japan's (BOJ) Governor Haruhiko Kuroda and his eight board colleagues voted unanimously to keep its ultra-easy policy introduced in April 2013, according to a statement released by the BOJ after the meeting. "The BOJ will conduct money market operations so that the monetary base will increase at an annual pace of about JPY 60-70 trillion (USD 585-682 billion)," the central bank said "The BOJ will continue with the quantitative and qualitative monetary easing, aiming to achieve the price stability target of two percent, as long as it is necessary for maintaining that target in a stable manner," the central bank said, adding that it will examine both upside and downside risks to economic activity and prices, and make adjustments as appropriate. Last April, the BOJ launched a massive monetary easing program to end deflation that has lasted for nearly 15 years and achieve the two percent inflation target in fiscal 2015. The measures center on doubling the monetary base and purchases of government bonds in two years as well as to purchase more risky financial assets, including exchange-traded funds and real estate investment trusts. The board decided to double the maximum amount of its low interest funds to private banks that provide loans for companies to support strengthening the foundation for economic growth, to JPY 7 trillion (USD 68 billion) from JPY 3. 5 trillion (USD 34 billion). The BOJ extended the program's expiration by one year. The loan support fund, introduced in 2010, was originally scheduled to expire on March 31. The BOJ also extended another lending program to provide loans at an annual interest rate of 0.1 percent for financial institutions in areas affected by the 2011 earthquake and tsunami and the subsequent nuclear emergency. The program, set to expire in April, will be also extended by one year. The central bank unchanged its assessment of the domestic economy, saying, "Japan's economy is recovering moderately," the same phrase for the fifth straight month. A front-loaded increase in demand prior to the consumption tax hike has recently been observed, while exports have generally been picking up, the BOJ said. It also noted that business fixed investment has been picking up as corporate profits have improved. "With improvement in the employment and income situation, housing investment has continued to increase and private consumption has remained resilient." Reflecting these developments in demand both at home and abroad, industrial production has been increasing moderately, according to the BOJ. Last week, the government said Japan's economy grew at an annualized pace of 1.0 percent in the October-December period for the fifth straight quarter, but the growth was much weaker than the 1.1 percent expansion in the previous quarter due to a slump in exports. On the price front, the central bank said the year-on-year rate of change in the consumer price index is at around 1.25 percent. "Inflation expectations appear to be rising on the whole." The country's core consumer price index rose from a year earlier 1.3 percent in December for the seventh straight month of gain. With regard to the outlook, the BOJ said Japan's economy is expected to continue a moderate recovery as a trend, while it will be affected by the front-loaded increase and subsequent decline in demand prior to and after the consumption tax hike in April. It pointed out risks, saying, "Risks to the outlook include developments in the emerging and commodity-exporting economies, the prospects for the European debt problem, and the pace of recovery in the US economy."