BOJ Preview - Jan 2021: Looking To The March Review

• The BOJ's January monetary policy meeting is set be a placeholder ahead of the Bank's monetary policy review (which should be released alongside its March monetary policy decision), with the BOJ set to leave its monetary policy settings unchanged. The latest update of the Bank's economic forecasts, which will be released in the Outlook Report, is set to be inconsequential for monetary policy settings.
• The economic issues facing Japan are well documented, while the country's fiscal situation has been subjected to the COVID-19 driven tumult evident across the globe.
• Looking ahead, the BOJ ultimately needs to balance the need to maintain its ultra-loose monetary policy settings against the backdrop provided by the broader financial markets.
• The outcome of the Bank's review is set to have at least some form of short-term impact on the dynamic of financial markets, although any tweaks are expected to represent subtle adjustments to the existing framework, as opposed to wholesale changes, with a focus on promoting flexibility and longevity within the Bank's ultra-loose settings. The Bank will not want any communication issues, which could lead to worry that it is moving away from its ultra-loose settings, as it looks to foster stable market conditions and a steeper Japanese yield curve.

Please use the following link to access the full review:

BOJ Preview Jan 2021.pdf