BOJ holds fire, nudges up growth forecast on receding global risks

Ritu

By Ritu

Capital Sands

The Bank of Japan kept monetary policy steady and nudged up its economic growth forecasts on Tuesday, as the government’s stimulus package and receding pessimism over the global outlook took some pressure off the central bank to top up stimulus.

The BOJ also signaled cautious optimism over the global economy after the United States and China agreed on a preliminary deal to defuse their bitter trade war, saying that risks surrounding the outlook have “subsided somewhat.”

Markets will now scrutinize BOJ Governor Haruhiko Kuroda’s post-meeting briefing for clues on how his views on the pros and cons of his stimulus could affect policy decisions this year.

As widely expected, the BOJ kept its short-term interest rate target at -0.1% and a pledge to guide 10-year government bond yields around 0%.

It also maintained a guidance that commits to keeping rates at current low levels, or even to cut them, until risks keeping it from achieving its 2% inflation goal subside.

The BOJ targets rates in guiding policy under a framework dubbed yield curve control. It also continues to buy huge amounts of government bonds and risky assets in an effort to fire up inflation to its elusive target.

The central bank also upgraded its growth estimate for fiscal 2021, but largely maintained its price forecasts that show inflation missing its 2% target through early 2022.

Japan’s economy is likely to continue expanding moderately as a trend” as the impact of slowing global growth on domestic demand will be limited, the BOJ said in the quarterly report.

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