Bank of Japan
October 29, 2020
This month’s Bank of Japan Board meeting coincided with the release of its quarterly Outlook for Economic Activity and Prices. Targeted interest rates of -0.1% on overnight money rates and “around 0%” on the 10-year JGB yield since September 2016 were again not changed, nor did officials elect to modify any other policy settings, according to the separate statement on monetary policy. The primacy of promoting 2% CPI inflation in the medium term has been displaced for the time being by the more pressing urgency of countering the negative economic impact of the Covid-19 pandemic. A projected 4.7% drop at the time of the July meeting in GDP this fiscal year has been revised larger to negative 5.5%, and specific concern is now being expressed that the lingering fallout of Covid might squeeze bank profit margins and damage financial market functionality. The new baseline growth forecast calls for GDP to revive 3.6% next fiscal year but just 1.6% in fiscal 2022-23, plus growth risk remains skewed to the downside. Regarding inflation, officials now project consumer prices dropping 0.6% this fiscal year and then edging up 0.3% in FY21/22 and 0.7% in FY22/23. Officials upgraded their view on exports, but corporate investment and personal consumption continue to look problematic. Inflation expectations are very subdued.
Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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