MNI INSIGHT: BOJ May Add Post-Covid Plans To Forward  Guidance

The Bank of Japan is considering adding a post-coronavirus policy stance into forward guidance for the policy rates to reinforce the accommodative financial environment, MNI understands.

Policymakers meet this week and they will look to address both the current state of the economy and, in part through the publication of their policy strategy review, the path ahead as well.

The bank can't show a clear post-coronavirus policy yet -- partly because the path of the virus is still unknown -- but policymakers can vow to keep easy policy for a considerable period, and it will keep its near-term policy stance in place. The BOJ will continue to underline that it will not hesitate to take further easing measures if necessary as both the virus and economy evolve.

Bank officials are still against tweaking their statement wording that says policy rates will "remain at their present or lower levels" as they are determined not to give any signals that could be interpreted as a shift away from an easing bias.

JGB BANDS

The BOJ also looks set to formalize the trading band currently tolerated for 10-year JGBs and clarify its stance on purchases of Exchange Traded Funds at the March meeting, as it prepares to tweak and not radically overhaul its strategy when policymakers finally lay out the conclusions of the policy review set up in November.

The board will likely reject calls to widen the band it is happy to see JGBs trading in, as such a move would not be consistent with controlling yields at overall low levels along the curve at a time the BOJ tries to help engineer the economy's recovery from the Covid-19 pandemic.