On Today's Decision at the Monetary Policy Meeting

October 10, 2003
Bank of Japan

(For immediate release)

1. The foundation for a gradual recovery in Japan's economy is being laid, as the environment for exports and business sentiment have improved.Looking forward, exports and production will likely increase, which in turn will gradually gather momentum for an economic recovery in Japan.It is expected, however, to take some more time before a self-sustaining recovery in domestic demand gains momentum, given the existence of persisting structural problems, such as debt overhang and excess labor.
2. The Bank of Japan is currently committed to maintaining the quantitative easing policy until the consumer price index (excluding fresh food, on a nationwide basis) registers stably a zero percent or an increase year on year.The Bank emphasizes that it is firmly committed to this policy at this juncture where there are signs of improvement in the Japanese economy.Today, the Bank decided to take the following measures at the Monetary Policy Meeting.These measures will contribute to further ensuring the recent movement toward an economic recovery from the monetary policy front.
   1. (1) Increase in the upper limit of the target balance of current accounts
      The Bank raised the upper limit of the target balance of current accounts from around 30 trillion yen to around 32 trillion yen.The new target balance is 'around 27 to 32 trillion yen.'(see Attachment)This action was taken in light of making room for conducting monetary operations in a more flexible manner.
   2. (2) Extension of the maturity of the purchase of Japanese government securities with repurchase agreements
      With the aim of enhancing the flexibility of monetary operations, the Bank extended the maximum maturity of the purchase of Japanese government securities with repurchase agreements from 6 months to 1 year.
   3. (3) Enhancement of monetary policy transparency
      With the aim of enhancing the transparency of monetary policy, the Bank will make available more detailed description of the commitment to maintaining the quantitative easing policy, and improving the way in which the Bank's evaluation of the developments of the economy and prices is communicated (see "Enhancement of Monetary Policy Transparency").

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(Attachment)

At the Monetary Policy Meeting held today, the Bank of Japan decided, by majority vote, to set the following guideline for money market operations for the intermeeting period:The Bank of Japan will conduct money market operations, aiming at the outstanding balance of current accounts held at the Bank at around 27 to 32 trillion yen.

Should there be a risk of financial market instability, such as a surge in liquidity demand, the Bank will provide more liquidity irrespective of the above target.

(Reference)

Meeting hours :
October 9th: 13:59-15:55
October 10th: 9:00-13:54

Members present :
Toshihiko Fukui ( Governor )
Toshiro Muto ( Deputy Governor )
Kazumasa Iwata ( Deputy Governor )
Kazuo Ueda
Teizo Taya
Miyako Suda
Shin Nakahara
Hidehiko Haru
Toshikatsu Fukuma

(Others present)

October 9th:
From Ministry of Finance:
Hiroki Tsuda, Deputy Vice Minister for Policy Planning and Co-ordination (13:59-15:55)

From Cabinet Office:
Yoshirou Nakajou, Director General for Economic and Fiscal Management (13:59-15:55)

October 10th:
From Ministry of Finance:
Keiichi Ishii, Senior Vice Minister of Finance ( 9:00-12:21)
Hiroki Tsuda, Deputy Vice Minister for Policy Planning and Co-ordination (12:27-13:25,13:31-13:54)

From Cabinet Office:
Yoshirou Nakajou, Director General for Economic and Fiscal Management
( 9:00-13:25,13:31-13:54)

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"
2:00 p.m. on Tuesday, October 14
English version of "The Background"
Within a few business days from the release of "The Bank's View"

Release of minutes:
2:00 p.m. on Thursday, November 27