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Bank of Japan officials see global stock markets getting ahead of themselves with excessive optimism, buoyed by the hopes of a coronavirus vaccine roll-out and continued easy policy from the leading central banks, MNI understands
The BOJ certainly sees the chance of an upside surprise for the economy in 2021, but as of now, it sees a return to pre-covid-19 levels no earlier than early fiscal 2022.
Even then officials expect the pace of recovery to be modest -- provided there are no unforeseen developments in the economy.
However, high stock prices globally and in Japan suggest investors see a rapid boost to economic activity in or after the second quarter of 2021 due to the vaccine.
While BOJ officials are somewhat perplexed by the markets' optimistic view, they also think a rapid economic recovery and a rise in corporate profits cannot be ruled out.
For now, the banks' efforts will be focused on easing financial conditions for companies. At its two-day policy meeting ending Friday, the BOJ is expected to extend its lending facility which is due to expire March 31 by six months to September end.
Despite rising stock prices, the spread of infections and the government's decision to temporarily suspend its 'Go To Travel' subsidies are overshadowing the outlook for a smooth economic recovery. Tokyo saw 678 infection cases on Wednesday, the biggest number in a single day.