JAKARTA (TheInsiderStories) – Bank of Japan (BoJ) hold its negative interest rate of minus 0.1 percent and cuts the inflation rate to 2 percent of the gross domestic products.
The board also decided to continue the quantitative and qualitative monetary policy with yield control to achieve the price stability and target of 2 percent, in observe the consumer price index exceeds 2 percent and stays above the target in a stable manner.
“As for policy rates, the Bank intents to maintain the current extremely low levels of short and long term interest rates for an extended period of time, taking into account uncertainties regarding economic activity and prices including the effect of the consumption tax hike schedules to take place in October 2019,” said the governor Haruhiko Kuroda in a written statement.
Furthermore, the Bank also stated will purchase Japanese government bonds to kept the 10-years yield will remain at around zero percent. BoJ will increase at annual pace of about 80 trillion yen.
The central bank will purchase exchange trade funds and Japan real estate investment trust to rise the outstanding of about 6 trillion yen and 90 billion yen, respectively. As for commercial paper and corporate bonds the Bank will maintain their amounts outstanding about $2.2 trillion yen and 3.2 trillion yen, each.
At the same day, its reported the Japan’s Indices of Industrial Production fell by 1.1 percent in September, following a 0.2 percent rise in the previous month. While manufacturers’ shipments dropped sharply 3.0 on month of month basis (MoM) from a 1.7 percent in the previous month, inventory rose by 2.3 percent and the inventory ratio surged by 7.8 percent, climbing to the highest level since June 2009.
While, the industrial product dropped broadly across most industry groupings, particularly for transport equipment, general-purpose, production and business-oriented machinery, and electric parts and devices. The sharp decline for manufacturers’ shipments was also driven by those three industry groupings, but all industry groupings saw declines.
Harumi Taguchi, Principal Economist, IHS Markit rated, although the sluggish September results were attributed largely to disruptions caused by Typhoon Jibi (causing a temporary shutdown of Kansai International Airport) and the Hokkaido earthquake, the weakness in industrial production also reflected softer export orders, including a contraction of orders for machinery tools from China.
Given weak average consumer spending for July and August and slack retail sales in September, he said, the contraction of 4.9 percent quarter-to-quarter for the IIP in the third quarter (Q3) suggests real GDP growth could also turn negative in Q3.
“Although a drop in industrial production could to lead to a rebound in October, we are skeptical of the industry’s growth outlook of 6.0 percent MoM. This is not only because industry outlooks tend to be optimistic, but also because the figure anticipates growth for the production of electric parts and devices even though inventories of electric parts and devices have surged in the last few months,” said the analyst.
While uncertainties over global trade tensions remain sustained, destocking could weigh on Japan’s Industrial Production over the near term, he ended.
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