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Outline of Monetary Policy

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"Price Stability Target" of 2 Percent and "Quantitative and Qualitative Monetary Easing with a Negative Interest Rate"

"Price Stability Target" of 2 Percent

The Bank of Japan Act states that the Bank's monetary policy should be "aimed at achieving price stability, thereby contributing to the sound development of the national economy."

Price stability is important because it provides the foundation for the nation's economic activity. In a market economy, individuals and firms make decisions on whether to consume or invest, based on the prices of goods and services. When prices fluctuate, individuals and firms find it hard to make appropriate consumption and investment decisions, and this can hinder the efficient allocation of resources in the economy. Unstable prices can also distort income distribution.

On this basis, the Bank set the "price stability target" at 2 percent in terms of the year-on-year rate of change in the consumer price index (CPI) in January 2013, and has made a commitment to achieving this target at the earliest possible time.

For details, please see The "Price Stability Target" under the Framework for the Conduct of Monetary Policy [PDF 18KB] (released on January 22, 2013). Also, the Bank released the statement titled "Joint Statement of the Government and the Bank of Japan on Overcoming Deflation and Achieving Sustainable Economic Growth" [PDF 14KB] with the government in January 2013.

"Quantitative and Qualitative Monetary Easing with a Negative Interest Rate"

At the Monetary Policy Meeting held on January 28 and 29, 2016, the Bank decided to introduce "Quantitative and Qualitative Monetary Easing (QQE) with a Negative Interest Rate."

The following is the outline of "QQE with a Negative Interest Rate." For details, refer to Introduction of "Quantitative and Qualitative Monetary Easing with a Negative Interest Rate" [PDF 30KB] (released on January 29, 2016).

(1) Interest-Rate Dimension: The Introduction of a Negative Interest Rate

The Bank will apply a negative interest rate of minus 0.1 percent to current accounts that financial institutions hold at the Bank.

See (Reference) Key Points of Today's Policy Decisions [PDF 37KB] (released on January 29, 2016).

(2) Quantity Dimension: The Guideline for Money Market Operations

The Bank will conduct money market operations so that the monetary base will increase at an annual pace of about 80 trillion yen.

(3) Quality Dimension: The Guidelines for Asset Purchases

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 7-12 years.

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 6 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.

(4) Monetary Policy Stance: The Continuation of "QQE with a Negative Interest Rate"

The Bank will continue with "QQE with a Negative Interest Rate," 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 risks to economic activity and prices, and take additional easing measures in terms of three dimensions -- quantity, quality, and interest rate -- if it is judged necessary for achieving the price stability target.

The Bank first introduced QQE in April 2013; expanded it in October 2014; introduced supplementary measures in December 2015; and enhanced monetary easing in July 2016. For details, see the following.

Introduction of the "Quantitative and Qualitative Monetary Easing" [PDF 154KB] (released on April 4, 2013)

Expansion of the Quantitative and Qualitative Monetary Easing [PDF 65KB] (released on October 31, 2014)

Statement on Monetary Policy (Introduction of Supplementary Measures for Quantitative and Qualitative Monetary Easing) [PDF 32KB] (released on December 18, 2015)

Enhancement of Monetary Easing [PDF 67KB] (released on July 29, 2016)

For more information on the current conduct of the Bank's monetary policy, see Monetary Policy. For speeches and statements by Governor Kuroda, see Speeches by speaker. For speeches and statements by other Policy Board members, see Speeches and Statements.

Outline of Monetary Policy

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