December 18 2015

Dec. 18, 2015 ( – Following a longer than expected meeting, the Bank of Japan announced additional measures to supplement its quantitative and qualitative monetary policy easing program. Policy makers said that the bank will begin purchasing stock market exchange traded funds and Japanese Real Estate Investment Trusts (J-REIT), and will extend the maturity of the bonds that are bought.

The size of the additional easing program would only amount to about 10% of the current ETF buying levels. The central bank did not expand the size of annual asset purchases and kept it at the current level around 80 trillion yen ($650 billion).

The yen rallied in the aftermath of the announcement, as the size of the expansion was perceived by the markets as insufficient.

Below is the Bank of Japan’s press release in its entirety.

“Statement on Monetary Policy
1.At the Monetary Policy Meeting held today, the Policy Board of the Bank of Japan decided,
by an 8-1 majority vote, to set the following guideline for money market operations for the
intermeeting period:
The Bank of Japan will conduct money market operations so that the monetary base will
increase at an annual pace of about 80 trillion yen.
2. With regard to the asset purchases, the Bank decided, by a 6-3 majority vote, to set the
following guidelines:
a) The Bank will purchase Japanese government bonds (JGBs) so that their amount
outstanding will increase at an annual pace of about 80 trillion yen. With a view to
encouraging a decline in interest rates across the entire yield curve, the Bank will conduct
purchases in a flexible manner in accordance with financial market conditions. The
average remaining maturity of the Bank’s JGB purchases will be about 7-10 years until
the end of this year and be extended to about 7-12 years from the beginning of next year.
b) The Bank will purchase exchange-traded funds (ETFs) and Japan real estate investment
trusts (J-REITs) so that their amounts outstanding will increase at annual paces of about 3
trillion yen and about 90 billion yen respectively.
c) As for CP and corporate bonds, the Bank will maintain their amounts outstanding at about
2.2 trillion yen and about 3.2 trillion yen respectively.
3. Japan’s economy has continued to recover moderately, although exports and production have
been affected by the slowdown in emerging economies. Overseas economies, mainly
advanced economies, have continued to grow at a moderate pace, despite the slowdown in
emerging economies. In this situation, exports have been picking up, although sluggishness
remains in some areas. On the domestic demand side, business fixed investment has been
on a moderate increasing trend as corporate profits have continued to improve markedly.
Against the background of steady improvement in the employment and income situation,
private consumption has been resilient and housing investment has been picking up. Public
investment has been on a moderate declining trend, although it remains at a high level.
Industrial production has continued to be more or less flat. Meanwhile, business sentiment
has generally stayed at a favorable level, although somewhat cautious developments have
been observed in some areas.
Financial conditions are accommodative. On the price front,
the year-on-year rate of change in the consumer price index (CPI, all items less fresh food) is
about 0 percent. Inflation expectations appear to be rising on the whole from a somewhat
longer-term perspective, although some indicators have recently shown relatively weak
4. With regard to the outlook, Japan’s economy is expected to continue recovering moderately.
The year-on-year rate of change in the CPI is likely to be about zero percent for the time being,
due to the effects of the decline in energy prices.
5. Risks to the outlook include developments in the emerging and commodity-exporting
economies, the prospects regarding the debt problem and the momentum of economic activity
and prices in Europe, and the pace of recovery in the U.S. economy.
6. Quantitative and qualitative monetary easing (QQE) has been exerting its intended effects,
and the Bank will continue with QQE, aiming to achieve the price stability target of 2 percent,
as long as it is necessary for maintaining that target in a stable manner. It will examine both
upside and downside risks to economic activity and prices, and make adjustments as
7. In pursuing QQE according to the policy mentioned above, it is appropriate to encourage a
smoother decline in interest rates across the entire yield curve taking into account
developments in the JGB market and the situation in financial institutions’ asset holdings.
Moreover, as conversion of firms’ and households’ deflationary mindset has been progressing
under QQE and many firms have become proactive in making investment in physical and
human capital, it is desirable that these developments will become further widespread.
From this perspective, the Bank decided to adopt supplementary measures for QQE.”