MNI STATE OF PLAY: BOJ On Hold; Keeps Forward Guidance

The Bank of Japan board decided to leave monetary policy settings unchanged at its meeting on Thursday as the economy continues to improve despite the spread of the coronavirus.

The BOJ also left the forward guidance for the policy rates unchanged, indicating that the policymakers are vigilant against the impact of any prolonged pandemic impact on the economy and financial markets.

"For the time being, the BOJ will closely monitor the impact of Covid-19 and will not hesitate take additional easing measures if necessary, and also it expects short- and long-term interest rates to remain at their present or lower levels," the BOJ statement said.

The key points from the BOJ board decision after the latest two-day policy
meeting:

-- On monetary policy, the board voted 7-to-1 to stand pat on the yield curve control policy and the asset purchases, maintaining its recovery scenario based on accommodative financial conditions and the government's economic measures. Deputy Governor Masayoshi Amamiya absented.

-- 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 will continue buying JGBs to stabilize the 10-year yield "around
zero percent" without a limit, but it will also allow the long-term interest rate to "move upward and downward to some extend mainly depending on developments in economic activity and prices."

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

--On the policy decision, Goushi Kataoka, a former private-sector economist, dissented, considering that it was desirable to strengthen monetary easing by lowering the short and long-term interest rates in response to an increase in downward pressure on prices and to encourage firms to make active fixed investment for the post-Covid-19 era.

Kataoka also dissented on the forward guidance, saying that in order to avoid a return to deflation, there should be a revision in the forward guidance for the policy rates to relate it to the price stability target.