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(MNI) Tokyo
TOKYO (MNI)

The Bank of Japan board is likely to leave monetary policy and the forward guidance for policy rates unchanged as it assesses a current surge in Covid-19 cases that has brought about caution on policy views ahead of the July 20-21 board meeting, MNI understands.

A jump in Covid-19 cases and concern over the outlook for economic activity may also prompt a harder look at whether to extend the special program to facilitate financing for smaller firms. The BOJ may postpone any decision to the Sept. 21-22 meeting to monitor government reaction to the increased infections, (See: MNI INSIGHT:Covid Complicates BOJ Calculus On Business Support).

Prime Minister Fumio Kishida, fresh off a solid win in key upper house elections held at the weekend, said that he has no plans to introduce measures restricting economic activity.

IMPACT OF COVID SURGE

But for now, pandemic conditions will prevent the BOJ from removing the wording “closely monitor the impact of Covid-19” from its outlook as it monitors the current economic situation, (See: MNI INSIGHT: Govt Pressures Add To Weak Yen As BOJ Eyes Change).

The BOJ is also expected to leave “lower levels” of the policy rates because of potential downside risks from current Covid-19 conditions, (See: MNI INSIGHT: Exit From Negative Rates An Option For BOJ).

The board’s median forecast for inflation rate this and next fiscal year will likely be raised above 2.0%, though growth for this fiscal year is likely to be lowered and then raised for next year, (See: MNI INSIGHT: BOJ Likely To Up Price View, But Policy Unchanged).

BOJ views on private consumption are also affected by the pandemic conditions as it looks ahead to the third quarter for clarity on the pace of economic recovery, (See: MNI INSIGHT: Supply-Chain Gaps A BOJ Concern For Q3 Manufacturing).

MNI Tokyo Bureau | +81 90-2175-0040 | hiroshi.inoue@marketnews.com
MNI Tokyo Bureau | +81 90-2175-0040 | hiroshi.inoue@marketnews.com

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