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Announcement of the Monetary Policy Meeting Decisions (Feb.12)

February 12, 1999
Bank of Japan

(For immediate release)

Change of the Guideline for Money Market Operations

  1. (1) The Bank of Japan today held a Monetary Policy Meeting, a regular meeting of the Policy Board on monetary policy. By majority vote, the Policy Board determined to ease further the stance of money market operations for the inter-meeting period ahead as follows: The Bank of Japan will provide more ample funds and encourage the uncollateralized overnight call rate to move as low as possible.
    To avoid excessive volatility in the short-term financial markets, the Bank of Japan will, by paying due consideration to maintaining market function, initially aim to guide the above call rate to move around 0.15%, and subsequently induce further decline in view of the market developments.
  2. (2) The pace of deterioration of Japan's economy is moderating, mainly due to the increase in public investment. As the implementation of the government's economic stimulus gains pace, deterioration of the economy is expected to slowdown gradually. However, corporate and household sentiments remain cautious and private sector activities stagnant. Prices are on a downward trend. Clear prospects for rebound of the economy have yet to emerge.
    With respect to financial developments, tight conditions once observed in inter-bank transactions and corporate funding have subsided. However, long-term interest rates have risen considerably, and the yen has been appreciating against the dollar. Stock prices, on the whole, have been weak. Such market developments could have an adverse impact on the future prospect of our economy.
  3. (3) Taking into account current economic and financial conditions, the Bank of Japan has judged it appropriate to provide, through monetary policy operations, an utmost support for the economic activities in order to avoid possible intensification of deflationary pressure and to ensure that the economic downturn will come to a halt.
  4. (4) The Bank of Japan, through more injections of ample funds under the above-mentioned policy guideline, will encourage the expansion of money supply and make every effort to maintain the stability in financial markets.
  5. (5) In conducting actual money market operations, the Bank of Japan will attempt to provide more ample liquidity through existing short-term operational instruments, paying due attention to the maintenance of the successful functioning of the short-term financial markets. The Bank of Japan, in particular, intends to actively utilize government bonds repo operations, which provide short-term liquidity in exchange for government bonds.
    With respect to outright purchase of long-term government bonds, the Bank of Japan will continue to maintain the current frequency and amount.
  6. (6) In order to bring Japanese economy back to a solid recovery path, it is important not only to provide support from monetary and fiscal sides but also to steadily promote financial system revitalization and structural reforms. The Bank of Japan strongly hopes that the decision to make money market operations more accommodative will, combined with various efforts made by the parties concerned, contribute to surmounting the economic difficulties we face.

(Reference)

Meeting hours :
9:00 a.m. to 5:34 p.m.

Members present :
Masaru Hayami ( Chairman, Governor )
Sakuya Fujiwara ( Deputy Governor )
Yutaka Yamaguchi ( Deputy Governor )
Yasuo Gotoh
Susumu Taketomi
Toshio Miki
Nobuyuki Nakahara
Eiko Shinotsuka
Kazuo Ueda

(Others present)

From Ministry of Finance:
Sadakazu Tanigaki, State Secretary for Finance ( 9:00 a.m. to 2:58 p.m.)Toshirou Mutou, Deputy Vice Minister for Policy Co-ordination ( from 3:03 p.m.)
From Economic Planning Agency:
Taichi Sakaiya, Minister ( 9:29 a.m. to 10:28 a.m.)Eiji Kawade, Co-ordination Bureau Director General ( 9:00 a.m. to 9:29 a.m., from 10:28 a.m.)

Release of Monthly Report of Recent Economic and Financial Developments:
( Consisting of "The Bank's View" and "The Background" )

Japanese version of the entire report and English version of "The Bank's View"
9:20 a.m. on Tuesday, February 16, 1999
English version of "The Background"
End of February 1999

Release of minutes:
2:00 p.m. on Wednesday, March 17, 1999