global economy

Bank of Japan cuts growth outlook, holds monetary policy

Agence France-Presse

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Bank of Japan cuts growth outlook, holds monetary policy

People walk on a pedestrian bridge in Tokyo's Shinjuku district in Japan on October 26, 2020. (Photo by Behrouz MEHRI / AFP)


'Japan's economy is likely to follow an improving trend,' says the central bank, 'but the pace is expected to be only moderate while vigilance against COVID-19 continues'

The Bank of Japan (BoJ) on Thursday, October 29, lowered its economic growth and inflation forecasts for this fiscal year, but while its massive monetary easing policy was left untouched its governor said officials were ready to unveil fresh support measures if needed.

“Japan’s economy is likely to follow an improving trend, with economic activity returning and the impact of the novel coronavirus waning gradually, but the pace is expected to be only moderate while vigilance against COVID-19 continues,” the central bank said in its quarterly report issued after a policy meeting.

It said its forecast for growth was now lower compared with that given in July, “mainly due to a delay in recovery in services demand, but is somewhat higher for fiscal 2021 and more or less unchanged for fiscal 2022.”

The year-on-year change in prices excluding fresh food “is likely to be negative for the time being,” officials said, citing factors including the virus, previous declines in oil prices, and a domestic travel subsidy program.

For the year to March 2021, the BoJ expects the economy to shrink 5.5%, against a 4.7% contraction in the July estimate, while prices are seen falling 0.6%, compared with a previously forecast 0.5% decline.

For the fiscal year to March 2022, however, it revised up growth and inflation forecasts to 3.6% from 3.3% and 0.4% from 0.3%, respectively.

The BoJ kept its negative interest rate of 0.1% on bank deposits, as well as its policy of unlimited purchases of Japanese government bonds, to ensure their 10-year yields remain around 0%.

“We’re aware that the future economic outlook will continue to be highly uncertain,” Governor Haruhiko Kuroda told reporters, citing further spread of infections worldwide and new lockdowns in Europe. 

“There’s a strong sense of economic uncertainty so we need to carefully monitor the trend,” he said.

“We will not hesitate to introduce additional easing measures if necessary.”

The virus situation in Japan has been relatively stable in recent months, with around 100,000 infections and 1,700 deaths recorded so far.

But a second wave is accelerating in key markets, including in Europe, where France has announced a new nationwide lockdown. –

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