Japan's modest growth rate likely to continue

Bank of Japan (BoJ) decided to continue its ongoing open-ended Quantitative and Qualitative Easing program today. Based on the decision, the monetary base will further extend at an annual base of JPY 80tn. The central bank governor Kuroda made adjustment in stimulus package with a few changes, but no additional easing. The movement of Japan's stock market indicates the decision disappointed the investors as it recorded a fall of 1.5%. 

In revising the stimulus package, the governor announced an expansion of the average maturities of Japanese government bonds to 7-12 years from 7-10 years. In addition, the maximum amount of real-estate investment trusts was increased, now it can buy from 5% of each issue to 10%.

Kuroda believes that the targeted inflation rate of 2% will be achieved around October 2016 - March 2017. As the exports and business sentiment are improving, the economy is expected to post marginally better growth rate next year.

"We expect the modest growth to continue, so the BoJ faces no heavy pressure to ease for the sake of growth", states Nordea Bank.