Japan Pushes Monetary Stimulus Again: Not Optimistic

The Bank of Japan held a monetary policy conference in October 31st and decided to expand the scale of monetary easing to stimulate the economy that was hit by the excise tax increase in April 1st.

This is the first expansion of the Bank of Japan since the start of its ultra loose monetary policy in April 2013. It is widely interpreted by the market as being unoptimistic about the prospects for economic recovery.

The additional measures include the Japanese central bank's annual easing of the basic monetary value from about 60 trillion to 70 trillion yen to about 80 trillion yen, increasing the annual Japanese bond purchase scale by 30 trillion yen, extending the holding time of the national debt to 7 to 10 years, and the purchase amount of the ETF and REIT will also increase two times.

Kuroda Higashihiko, President of the Bank of Japan, said at a press conference that monetary easing will continue to be implemented until inflation stabilises at 2%.

Kuroda said that after the growth of consumption tax in April this year, the decline in personal consumption and the recent sharp decline in crude oil prices have restrained the upward trend of inflation.

In order to avoid Japan's economic downturn, the central bank decided to expand the scale of easing.

Prior to this, Kuroda has been implying that it will maintain the existing loose scale.

At the central bank's monetary policy meeting on that day, 9 monetary policy members adopted the decision to increase the monetary easing with a 54 vote.

Bloomberg quoted the director of the Research Institute of agriculture, forestry and gold, Nan Wu Chi, as saying that the additional easing of the central bank is a way to clear the way for the government to raise the consumption tax again.

Japanese Prime Minister Abe Shinzo is hesitant to decide whether to increase the consumption tax rate from 5% to 8% in October next year.

Japan's general affairs department released data released on September.

It was 3.6%, an increase of 0.1 percentage points from last month, and household consumption expenditure decreased by 5.6% over the same period last year, which has declined for 6 consecutive months.

The national consumer price index (CPI), excluding fresh food in September, rose by 3% over the same period last year, though it rose for the 16 consecutive month, but the lowest in 6 months.

The core inflation rate, after deducting the growth of consumption tax, rose by only 1%, far from the central bank's goal of achieving 2% inflation rate in April 2015.

The Bank of Japan released the economic and price outlook report on the same day, reducing the economic growth rate of 2014 from 1% to 0.5%, and 2015.

It is expected to drop from 1.9% to 1.7%.

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On the same day, the Tokyo stock market Nikkei index closed up 755 points, at 16413 points, soared to a high level since 2007, or 4.83%.

The yen fell to more than 111 from the 109.26 before the announcement.

However, the market is not optimistic about the easing effect.

"Andouble economics" has been introduced for two years, and the Japanese economy has experienced a brief and mild recovery after the policy stimulus, and then it shows its declining trend.

The yen depreciated by about 30%, not only failed to boost exports, but increased the trade deficit.

Although the stock market has hit a new high since the financial crisis, the real wage income of employees is decreasing.

Japan's economic structural contradictions have become increasingly prominent.

In addition, the Federal Reserve has recently announced its withdrawal from quantitative easing. The divergence between the US and Japan's economic trend and monetary policy is increasingly obvious.