MNI BRIEF: BOJ On Hold, Keeps Forward Guidance

The Bank of Japan board Thursday decided to stand pat on monetary policy as the economy continues to recover inline with expectations, though it noted inflation expectations had risen

Officials fully backed the policy stance in the first unanimous vote since October 6-7, 2014.

The BOJ decided to phase out the special facility to facilitate financing of smaller firms and instead shifted to fund-provisioning that would meet a wider range of financial needs.

The board left the forward guidance for the policy rates unchanged, indicating policymakers are vigilant in their concerns about near-term downside risks to economy, and saw the need to keep the easing bias regarding the outlook for monetary policy.

“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.”

Under the yield curve control framework adopted in September 2016, the BOJ will keep the target for the overnight interest rate at -0.1%.

The BOJ said it would purchase a necessary amount of JGBs without setting an upper limit so that the 10-year JGB yield remains at around zero percent.

The BOJ also left the scale of its purchases of ETFs (exchange-traded funds) and J-REITs (Japan real estate investment trusts) unchanged with an annual upper limit of about JPY12 trillion and about JPY180 billion.

The Japanese yen seesawed after the announcement. It fell to JPY145.37, the lowest level since August 1998 ( See JPY: USD/JPY Unwinds Brief Spike Through Y145.00 After BOJ Stands Pat On Policy).