MNI BRIEF: BOJ Holds, Tweaks Guidance, To Review Past Policy

The Bank of Japan board on Friday decided to keep monetary policy unchanged, choosing to focus attention on downside risk to the economy amid heightened global uncertainty, while shifting its easing bias towards a neutral stance.

However, the BOJ board tweaked the forward guidance for the policy rates as the government downgraded its clarification of Covid-19 to Class 2, the same level of seasonal flu, from Class 5. “The BOJ will continue to maintain stability of financing, mainly of firms, and financial markets, and will not hesitate to take additional easing measures if necessary,” the BOJ said in a statement.

The Bank also removed the wording on the policy rates “to remain at their present or lower levels," which indicates a more neutral easing bias. The Board also decided to conduct a review of its past monetary policy, which will take between 1-1.5 years, and voted unanimously to stand pat on yield curve control and asset purchases, maintaining its recovery scenario based on accommodative financial conditions and the government’s economic measures. The Bank will continue to allow 10-year JGB yields to fluctuate in the range of around plus and minus 0.5pp from the target level.