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MNI REVIEW: BOJ On Hold; To Examine Policy; Results In March

BOJ Sees No Need To Change Framework Of QQE With Yield Curve Control


The Bank of Japan on Friday left monetary policy unchanged citing the modest economic recovery and extended its lending facilities to help companies but said it was ready to take additional easing measures depending on the impact of the resurgent virus.

As widely expected, the bank left the short-term policy interest rate at -0.1% and the long-term interest rate target at 'around zero percent' and extended the lending facility by six months to end on Sep 30. The bank said it would consider further extensions, if necessary.

The BOJ also said it will assess how to make monetary easing more effective and sustainable to achieve its price stability target of 2% and will release the results at its March 18-19 meeting. However, "there is no need to change the framework of QQE with Yield curve Control," the statement said.

The BOJ's last comprehensive assessment of monetary easing, including the economy and prices, was conducted in September 2016. The bank then introduced the yield curve policy to mitigate the side-effects of its negative interest rate policy.


The BOJ retained its forward guidance for policy rates, saying it would closely monitor the impact of Covid-19 and "will not hesitate to take additional easing measures, if necessary." However, it expects short- and long-term policy interest rates to remain at current or lower levels, it said.

Policymakers continue to monitor the flow of liquidity to companies amid sluggish profits and sales, with a close eye on the availability of bank lending.

The BOJ largely retained its assessment of the domestic and global economies as activity resumed saying both have started to pick-up. Still, "Japan's economy has remained in a severe situation due to the impact of the novel Covid-19 at home and abroad," the policy statement said.

The BOJ also kept its near-term outlook for the domestic economy saying it is "likely to follow an improving trend, supported by accommodative financial conditions and the government's economic measures." However, it expects the pace of improvement to be moderate.

As for the risks to the outlook, the BOJ said there were "extremely high uncertainties over the consequence of Covid-19 and the magnitude of its impact," globally. The bank also said it is necessary to pay close attention to firms' and households' medium- to long-term growth expectations for signs of any substantial decline.

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