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BoJ Leaves Policy Unchanged; Raises Growth Outlook


The Bank of Japan decided to maintain its monetary policy unchanged on Thursday, but raised the growth projections, citing the impetus from the fiscal stimulus measures.

The board voted 7-1 to retain the interest rate at -0.1 percent on current accounts that financial institutions maintain at the central bank.

The bank will continue to purchase necessary amount of Japanese government bonds without setting an upper limit so that 10-year JGB yields will remain at around zero percent.

Markets had expected the bank to keep monetary policy unchanged ahead of the policy review in March.

The BoJ is likely to keep both its short-term policy rate as well as its target for 10-year JGB yields unchanged for the foreseeable future, Marcel Thieliant, an economist at Capital Economics, said.

In its quarterly Outlook for Economic Activity and Prices report, released today, the bank said compared to October, the projected growth rates were somewhat higher, mainly for fiscal 2021, reflecting the effects of the government’s economic measures in particular.

The outlook is based on the assumption that the impact of the pandemic will wane gradually and then almost subside toward the end of the projection period.

The bank lifted the fiscal 2021 GDP growth outlook to 3.9 percent from 3.6 percent. Likewise, the growth projection for the fiscal 2022 was raised to 1.8 percent from 1.6 percent.

The projected rates of increase in the CPI were more or less unchanged.

The BoJ expects consumer prices to rise 0.5 percent in the fiscal 2021 instead of 0.4 percent forecast in October. At the same time, inflation outlook for the fiscal 2022 was retained at 0.7 percent.

For the fiscal 2020, the bank projected an economic contraction of 5.6 percent versus prior forecast of -5.5 percent. Consumer prices were expected to drop 0.5 percent compared to -0.6 percent estimated in October.

The bank noted that risks to both economic activity and prices were skewed to the downside, mainly due to the impact of Covid-19.

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