Uncertainties surrounding the economic outlook, mainly for overseas economies, can also restrain firms’ willingness to increase prices and wages. As the developments in inflation expectations act as an important factor in defining the underlying trend in inflation, they need to be carefully monitored. V.  Thinking behind current monetary policy  I would now like to turn to the Bank’s monetary policy.
In light of heightened uncertainties surrounding overseas economies, such as those stemming from the United Kingdom’s vote to leave the EU, the Bank at the July 2016 MPM decided to enhance monetary easing in order to prevent these uncertainties from leading to a deterioration in business confidence as well as consumer sentiment, and to ensure smooth funding in foreign currencies by Japanese firms and financial institutions, thereby supporting their proactive economic activities.