MNI STATE OF PLAY: Pandemic Measures In Focus For BOJ Meeting

The Bank of Japan sees the emergence of the Omicron variant as a downside risk to the economy and could extend pandemic funding measures for companies even as an expected baseline economic recovery scenario is maintained at this week's policy-decision meeting, MNI understands.

The BOJ board at the two day meeting ending Dec. 17, is expected to discuss measures to support corporate financing set to expire in March 2022, see: MNI INSIGHT: BOJ Moves Forward Special Funds Decision Timeframe.

But some board members may emphasise the need to further assess the impact of the Omicron variant at home and abroad with vaccination rates improving, waiting until the January policy-setting meeting on whether to extend after a review of the medium-term economic growth outlook.

Both exports and industrial production, as the BOJ expected in October, are gradually recovering from supply-side restrictions that hit Q3 GDP. However, bank officials don’t expect to see a sharp recovery as supply will not catch up with strong demand immediately.

But the BOJ is expected to upgrade its assessment on private consumption with pandemic state of emergency measures lifted at the start of October with any impact from Omicron not expected to change that view. In October, the BOJ said, “private consumption has shown signs of a pick-up recently.”

Recent high-frequency data shows hotel reservations are also recovering, although older people remain cautious about going out.