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Macroeconomics  |  August 09, 2012 11:52:00

Bank of Japan continues the program of quantitative easing

The Japanese central bank in the meeting today decided to maintain the basic interest rate to lowest level in history 0-0,10% and continue the program of quantitative easing by the end of 2013. The purchase of financial assets remained at 45 trillion yen and loan program in the amount of 25 trillion yen. The total size of the program remained unchanged at 70 trillion yen.

The statement said that overseas economies have undergone a slight improvement, but remained in the phase retardation. The global financial markets continued uncertainty due to the debt crisis in the eurozone. Japan's economic activity, supported mainly by domestic demand associated with the reconstruction after the earthquake. Continued growth of government expenditure, final consumption expenditure by households for measures to stimulate demand and moderate growth in business investment.Exports of goods is stagnating, the latest statistics of industrial production was relatively weak. The annual growth rate of consumer prices excluding food remains around 0 percent.

Regarding the outlook, the BOJ is expected to return the economy to the path of moderate growth based on domestic demand and a slight recovery in exports. CPI annual growth rate will remain for some time near zero. The central bank now aims to achieve the 1.0% inflation target. Complete relaxation of monetary policy should ensure a successful transition to sustainable growth with price stability.

With regard to the risks to the global outlook remains high degree of uncertainty due to debt problems in Europe, a weak recovery in U.S. growth and the achievement of price stability and growth in emerging economies.With regard to the risks to the outlook for price, it should be given more attention to international developments in commodity prices in the medium to long term.

The central bank realizes that Japan is facing a critical challenge of overcoming deflation and a return to sustainable growth with price stability. This challenge should be met by an extremely loosened monetary policy.

In July, the BOJ reduced the projected economic growth this year by 0.1% to 2.2%, for 2013 it should be maintained at 1.7%. Estimation of core inflation was reduced from 0.3% to 0.2% for next year is left unchanged at 0.7%. IMF projects GDP growth of Japan this year by 2.5% in 2013 to 1.5%.

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