MNI: BOJ Unlikely To Act Before Fed SVB Report

The Bank of Japan will not take further policy action until the U.S. Federal Reserve releases its report on the failure of Silicon Valley Bank (SVB) expected by May 1, MNI understands.

BOJ officials will examine the Fed’s assessment of the financial system and the market's reaction to the report, which will inform the Bank's outlook for the U.S. economy and global financial markets – crucial issues for BOJ policy decisions.

Global financial markets have regained a certain measure of stability in the wake of the Fed's decisive measures to shore up the financial system, but the outlook for global markets and the economy remains uncertain.

The International Monetary Fund Tuesday warned of downside risk to the global economy due to the financial turmoil, cutting its Japan GDP projection to 1.3% (See: MNI BRIEF: IMF Cuts Japan 2023 GDP View to 1.3%). "Risks to the outlook are heavily skewed to the downside, with the chances of a hard landing having risen sharply," the IMF said, adding that financial sector stress could force central banks "to reconsider their policy paths."

The Fed launched an internal probe – led by Vice Chair for Supervision Michael Barr – aimed at the supervision of SVB after its collapse sparked sharp criticism of the central bank’s oversight.