MNI BRIEF: BOJ Keeps Recovery View; Cuts Overseas Outlook

The Bank of Japan board on Tuesday left its overall economic assessment, highlighting the ongoing recovery in the domestic economy but wary about a slowdown in overseas economies.

“Japan’s economy, despite being affected by factors such as high commodity prices, has picked up as the resumption of economic activity has progressed while public health has been protected from Covid-19,” the BOJ said.

As for the near-term outlook, the BOJ also left its view, saying, “Japan’s economy is likely to recover, with the impact of Covid-19 and supply-side constrains waning.”

But the BOJ slightly lowered its assessment on overseas economies, saying, “the pace of recovery in overseas economies has slowed.” It had previously said “slowdowns have been observed in overseas economies, with inflationary pressure exerted on a global basis and central banks thereby continuing to raise policy interest rates.”

Despite the rise in 10-year interest rate range to between around plus and minus 0.5 percentage points, the BOJ kept the forward guidance for the policy rates. (See MNI BRIEF: BOJ Lifts 10-Year Yield Target To 50bp)

“For the time being, while closing monitoring the impact of Covid-19, the BOJ will support financing, mainly of firms, and maintain stability in financial markets, and will not hesitate take additional easing measures if necessary, it also expects short- and long-term interest rates to remain at their present or lower levels,” the BOJ said.