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MNI REVIEW: BOJ Stands Pat on Policy; Keeps Forward Guidance
BOJ Will Not Hesitate To Take Additional Easing Measures
The Bank of Japan board Thursday kept monetary policy and the forward guidance for policy rates unchanged, indicating policymakers remain vigilant about the impact of the coronavirus on the economy and financial markets, reserving some ammunition for future use.
The central bank cited the gradual recovery in the economy, helped by exports and industrial production, for the widely expected decision.
"For the time being, the BOJ will closely monitor the impact of Covid-19 and will not hesitate to take additional easing measures, if necessary. It also expects short- and long-term interest rates to remain at their present or lower levels," the statement said.
VOTE
On monetary policy, the board voted 8-to-1 to stand pat on the yield curve control policy and asset purchases, maintaining its recovery scenario was based on accommodative financial conditions and the government's economic measures. Under the yield curve control framework adopted in September 2016, the
The BOJ will also keep the target for the overnight interest rate at -0.1%.
In its statement, the central bank said it will continue buying JGBs to stabilise the 10-year yield "around zero percent" without a limit on total purchases. However, it will also allow the long-term interest rate to "move upward and downward to some extent, mainly depending on developments in economic activity and prices".
The BOJ also left the annual scale of ETF (exchange-traded funds) and J-REIT (Japan real estate investment trusts) purchases unchanged, with the upper limit at about JPY12 trillion and about JPY180 billion, respectively.
DISSENT
Goushi Kataoka, a former private-sector economist, dissented on the policy decision, considering it desirable to strengthen monetary easing by lowering the short- and long-term interest rates, in response to a possible increase in downward pressure on prices and with the aim of alleviating firms' and households' interest burden.
Kataoka also dissented on forward guidance, saying that further coordination of fiscal and monetary policy was necessary, judging from the severe impact of Covid-19 on the economy.
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