Quantitative and Qualitative Monetary Easing

Transcription

1 Japan's Economy and Monetary Policy: Toward Overcoming Deflation Speech at a Meeting Held by the Naigai Josei Chousa Kai (Research Institute of Japan) in Tokyo July 29, 213 Haruhiko Kuroda Governor of the Bank of Japan Quantitative and Qualitative Monetary Easing Chart 1 Strong and Clear Commitment Achieve the price stability target of 2 %, with a time horizon of about 2 years. New Phase of Monetary Easing Both in Terms of Quantity and Quality Monetary base: Annual increase of about 6-7 tril. yen (x2 in 2 years). Amount outstanding of the Bank's JGB holdings: Annual increase of about 5 tril. yen (more than x2 in 2 years). Average remaining maturity of the Bank's JGB purchases: Extended to about 7 years (more than x2). Amount outstanding of ETF holdings: Annual increase of about 1 tril. yen (more than x2 in 2 years). 1

2 Chart 2 Expansion in the Monetary Base and JGB Holdings 3 tril. yen Introduction of the QQE End tril.yen 25 Monetary base End tril.yen 2 Amount outstandingofof the Bank's JGB holdings Jun tril.yen Mar tril.yen 15 End tril.yen 1 End-212 Mar tril.yen 89 tril.yen Jun tril.yen End tril.yen End tril.yen CY Source: Bank of Japan. 2 Effects of the QQE after 3 Months from Introduction Chart 3 3 Positive Developments Favorable Turn in Financial Conditions Favorable Turn in Expectations Favorable Turn in Economic Activity and Prices 3

3 Chart 4 Stock Prices 16 CY 213=1 Nikkei 225 Stock Average 15 Dow Jones Industrial Average 14 EuroSTOXX Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 4 Source: Bloomberg. Chart 5 Long-Term g Interest Rates 3. % Japan 2.5 United States Germany Jan-13 Feb-13 Source: Bloomberg. Mar-13 Apr-13 May-13 Jun-13 Jul-13 5

4 Exchange Rates Chart U.S. dollar/yen U.S. dollar/yen Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Source: Bloomberg. 6 6 Lending by Domestic Commercial Banks y/y % chg. Chart CY Note: ''Domestic Commercial Banks'' refers to major banks, regional banks I, and regional banks II. Source: Bank of Japan. 7

5 6 s.a. Consumer Confidence Chart 8 55 Improved Worsened 3 25 Consumer Confidence Index 2 CY Notes: 1. The Consumer Confidence Index is calculated by simply averaging four consumer perception indexes; ''overall livelihood,'' ''income growth,'' ''employment,'' and ''willingness to buy durable goods.'' 2. Surveys were conducted on a quarterly basis until March 24. Source: Cabinet Office. 8 Tankan: DI for Business Conditions Chart 9 2 DI <"favorable"-"unfavorable">, % points All enterprises -6 CY Source: Bank of Japan. 9

6 ''Rise'' Tankan: DI for Change in Output Prices 4 DI <"rise" - "fall">, % points 3 Forecast All enterprises 2 Large enterprises Chart ''Fall'' CY Source: Bank of Japan. 1 Outlook for Price Levels One Year from Now: Households' 'Views <Opinion Survey on the General Public's Views and Behavior> Chart 11 ''Will go up significantly'' ''Will go up slightly'' ''Will go down significantly'' ''Will go down slightly'' ''Will remain almost unchanged'' Dec Mar Jun % 2% 4% 6% 8% 1% 3.2 Note: Outlook for price levels one year from now excludes the effects of the consumption tax hike. Source: Bank of Japan. 11

7 2. Inflation Expectations of Market Participants % Chart 12 BEI (Break-Even Inflation) Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Note: BEI is the yield spread between fixed-rate coupon-bearing JGBs and inflation-indexed JGBs. Figures are calculated using yield data for the inflation-indexed JGBs with the longest maturity at each period that corresponds to 5 years recently. Source: Bloomberg. 12 Private Consumption Chart s.a., CY 21=1 Private final consumption expenditure (GDP-based, real) Synthetic consumption index (real) CY Source: Cabinet Office. 13

8 Chart 14 Business Fixed Investment 12 s.a., CY 25= Domestic shipments and imports of capital goods 6 5 CY Source: Ministry of Economy. 14 Consumer Prices Chart 15 3 y/y % chg. 2 Consumer price index (all items less fresh food) CY Source: Ministry of Internal Affairs and Communications. 15

9 Forecasts of Policy Board Members (Interim Assessment, July 213) y/y % chg. Chart 16 Real GDP CPI (all items less fresh food) Fiscal Fiscal Fiscal Notes: 1. Above figures are the median of the Policy Board members' forecasts (point estimates). 2. Forecasts for fiscal 214 and fiscal 215 exclude the effects of the consumption tax hikes. Source: Bank of Japan Key Factors toward Realizing the Outlook for Economic Activity and Prices Chart 17 Sustained spending of firms and households. Rise in inflation expectations. Developments in overseas economies. 17

10 Factors Affecting Long-Term Interest Rates Chart 18 <Lowering Factors> JGB purchases by the Bank of Japan (Nominal) Long-term = Expected short- term interest rates + Risk premiums interest rates <Raising Rii Factors> Improvement in economic outlook Rise in inflation expectations Rise in U.S. interest rates Rise in volatility Prices and Wages y/y % chg. y/y % chg. Forecast Chart Hourly cash earnings CPI (all items less fresh food, right scale) FY Notes: 1. ''Forecast'' refers to the median of the Policy Board member's forecasts (point estimates). t 2. Figures for CPI are adjusted to exclude the effects of the consumption tax hikes. 3. Figures for hourly cash earnings up through FY 199 are those for establishments with 3 or more employees. Sources: Ministry of Internal Affairs and Communications; Ministry of Health, Labour and Welfare; Bank of Japan. 19