Japan: Faster growth has yet to translate into an uptick in inflation - Wells Fargo

According to analysts from Wells Fargo,  the Bank of Japan will remain committed to its accommodative monetary policy measures for the foreseeable future.

Key Quotes: 

“The Japanese economy has quietly built some momentum in recent quarters. Real GDP growth picked up in Q2, the year-over-year pace lifting roughly 2 percent. Economic growth was driven primarily by domestic demand, another encouraging sign for a country that has at times relied on export growth to carry the burden. Faster growth has yet to translate into an uptick in inflation, which is hovering near zero percent.”

“At present, the Bank of Japan’s (BoJ) monetary policy programs encompass the following: (1) a negative policy rate of -0.10 percent, (2) a pace of Japanese Government Bond (JGB) purchases sufficient to keep the yield on the 10-year JGB “around zero percent” at an annual pace of roughly ¥80 trillion, (3) purchases of exchangetraded mutual funds at an annual pace of ¥6 trillion, (4) purchases of real estate investment trusts at an annual pace of ¥90 billion and (5) commercial paper and corporate bond holdings at their present values of ¥2.2 trillion and ¥3.2 trillion, respectively.”

“The Bank of Japan (BoJ) is steadfast in its commitment to achieving what has been a fleeting objective for a generation: sustained inflation of 2 percent. Japan has struggled with slow growth and inflation to a far greater extent than most other advanced nations, and as a
result, its central bankers are resolutely committed to banishing its deflationary demons. Thus, we believe the BoJ will remain committed to its accommodative monetary policy measures for the foreseeable future.”