MNI BOJ Review - October 2020: No Change, Downside In Focus

MNI POV (Point Of View):

• The BOJ left its monetary policy settings unchanged at its October meeting and delivered economic projections that were broadly in line with the various source reports that hit in recent weeks. As we flagged ahead of the decision, the adjustments made to the economic forecasts should be of no meaningful consequence for monetary policy.
• The Bank also reiterated its forward guidance, once again matching expectations, and leaving no real scope for any long-term evolution in expectations surrounding Japanese monetary policy.
• The BOJ was also keen to stress the uncertainty surrounding the economic outlook, while noting that risks for the economy are skewed to the downside, which provided no source of shock. Ultimately, the Bank believes that "the economy is projected to keep improving further with overseas economies returning to a steady growth path."
• We should caution that the Bank's assumptions regarding the economic outlook are based on the premise that COVID-19 will not be as widespread as it was previously, an assumption that could be tested if the recent developments and resulting lockdowns in Europe are anything to go by.
• Governor Kuroda also revealed that the BOJ will further extend its corporate lending facilities if required, but stressed that a decision on that matter will not be taken until nearer the current planned expiration of the outstanding credit provisions (March 31). As we noted ahead of the decision, this makes sense, especially with the government seemingly set to out lay its next round of (fairly limited) fiscal support in the coming weeks.

Please click here for the full review, or use the following link:

BOJ Review Oct 2020.pdf