The Bank of Japan, under departing Governor Shirakawa, has resisted government pressure for substantial further monetary easing. While introducing a “price stability target” of 2% inflation to replace the previous “goal” of 2% or lower “in the medium to long term”, the BoJ will stick with previous plans to add ¥36 trillion to its securities portfolio in 2013. Purchases will continue in 2014 but will fall to a net ¥10 trillion.

This decision is sensible since money supply measures are growing solidly – see previous post – and current purchases are already huge: ¥36 trillion equals 7.6% of projected 2013 GDP. If a monetary slowdown warrants further stimulus, this would be best achieved by lengthening the maturity of securities purchases rather than expanding the size of the programme.

Fans of yen debasement must now pin their hopes on Prime Minister Abe finding his Arthur Burns.