Under increasing pressure from its government, the Bank of Japan (BoJ) has set a two per cent inflation target and pledged to embark on a Fed-style open-ended asset purchase programme.

Additionally, the central bank left its benchmark rate unchanged at the prior range of zero to 0.1%.

Inflation target raised, but ...

In a joint statement with the government, the BoJ promised to "pursue aggressive monetary easing" although it was ambiguous about the exact time frame. The monetary authority only said that it would attempt to achieve its new inflation target "at the earliest possible time".

As well, it must be noted that the monetary policy decision was not unanimous, with seven members approving the actions while two voted against. According to the press release, two members dissented based on opposition to the inclusion of the sentence, "the Bank sets the price stability target at 2.0% in terms of the year-on-year rate of change in the consumer price index."

No less relevant, the new asset purchase programme will not begin until January 2014, once the current program of purchases is exhausted.

The BoJ expects the programme to increase "by about 10tn yen [per month] in 2014" and is expected to be maintained thereafter. The size of of the new program was more or less as foreseen.

Experts divided
As far as the experts are concerned, BNP Paribas had already warned that it would be difficult for the BoJ to "surprise the market".

As for the rest, opinions appear divided. Macquarie stated that the BoJ has been "more aggressive than the market expected", yet Tokyo-based Pinebridge Investments insisted that "there is still a lot of work to do and still a lot of room for improvement".

Along the same lines, Bank of Tokyo-Mitsubishi UFJ openly stated its displeasure at the lack of immediate action. "What disappoints us is that we can see the BoJ's hesitance to step up monetary stimulus," these analysts say.



JM

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