Goldman Sachs On Today’s BOJ Decision

Goldman Sachs expect "the BOJ to maintain the status quo across all monetary policy parameters, including short- and long-term policy rates, asset purchase programs (JGBs, ETFs, etc.), and corporate finance support programs introduced in March and subsequently enhanced in response to COVID-19.

• Corporate borrowing is still heightened, which has been filled especially by the government's financial support program. Under this program, the government provides companies with not only the interest payable on loans but also assurances from credit guarantee associations, while the BOJ provides free liquidity to financial institutions, which actually extend loans to companies. In order to prevent corporate failures as much as possible, we think that the BOJ will focus on keeping implementing this finance support as smoothly as possible, while scrutinizing the effect.
• Meanwhile, market interest is likely to focus on monetary policy under a new administration after Prime Minister Shinzo Abe steps down. Mr. Suga has said that he will basically maintain the course of Abenomics, centered on the combination of active deployment of fiscal stimulus and large-scale monetary easing (September 3, Nikkei). Mr. Suga also reportedly has confidence in BOJ Governor Haruhiko Kuroda's policy moves (September 6, Nikkei). The current monetary policy framework will thus likely be maintained, in ongoing efforts to achieve the 2% inflation target.
• At the same time, Mr. Suga has stated that he would want to see monetary easing expanded if it is deemed necessary to maintain jobs and ensure the continuity of companies (September 3, Nikkei). Mr. Suga is known for his strong awareness of the forex rate, having in the past said that forex is an important subject for him in terms of crisis management, and aims to create an environment in which Japanese exporters can continue to operate in Japan (December 27, 2016, Nikkei). Therefore, we cannot rule out the possibility that Mr. Suga could encourage the BOJ to ease further, if the yen appreciates significantly."