Bank of Japan Policy Review

July 16, 2021

The Bank of Japan’s policy settings will remain at -0.1% on the short-term interest rate, around zero percent on the 10-year JGB yield to be maintained by purchasing “a necessary amount of Japanese government bonds (JGBs) without setting an upper limit.” Policy Board member Kataoka dissented in favor of augmenting policy stimulus, as he has repeatedly been doing for some time. The policy meeting lasted four hours 47 minutes and coincided with the publication of the quarterly Outlook for Economic Activity and Prices. Updated forecasts now project real GDP expanding 3.8% in the current fiscal year, which represents a downward revision of 0.2 percentage points, followed by growth of 2.7% in fiscal 2022, and 1.3% in fiscal 2023. Japanese fiscal years run from April through March. Projected consumer price inflation this fiscal year was raised a half a percentage point to 0.6%. Officials see consumer prices then accelerating to a 0.9% pace in FY 2o22 but just 1.0% in FY 2023. Alas, that is still less than half the pace that officials seek to achieve with the so-called pursuit of quantitative and qualitative easing with yield curve control. The commitment is to maintain this policy until core inflation exceeds the 2% longer run target in a stable manner.

The most newsworthy element of the Bank of Japan‘s July policy review was the unveiling of a green policy funding scheme entitled Fund-Provisioning Measure to Support Efforts on Climate Change. The ultimate size of this facility remains unspecified, and it will be primarily directed at domestic loans.

Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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