MNI BoJ PREVIEW: December 2021 - Focus Turns to Corporate Financing

Executive Summary:

• Headline parameters likely to remain unchanged at December's meeting
• Focus turns to pandemic policies due to expire in March
• Decision could be pushed back to January to more accurately assess omicron risks

MNIBOJPrevDec21.pdf

The headline monetary policy parameters will remain unchanged at the end of the Bank of Japan’s December meeting, with the BOJ continuing its struggle when it comes to facilitating a notable inflationary impulse. Various board members have flagged heightened uncertainty since the outbreak of the omicron COVID strain, underscoring the Bank’s pledge to provide further stimulus, if needed.

Focus has already moved to the potential for the Bank to announce its decision regarding the extension of its Special Funds-Supplying Operations to Facilitate Financing in Response to COVID-19 (currently set to expire at the end of March). Recent BOJ board rhetoric on this front has pointed to a general stabilisation in the corporate borrowing space, although the ability of small firms when it comes to accessing capital remains more of a worry. The Bank will continue to assess the omicron situation and feedback in its quarterly Tankan survey.