Bank of Japan to Maintain Large-Scale Monetary Easing Policy... First Decision Since Suga's Inauguration

Interest Rate Hold at Meeting on 17th... Maintaining ETF Purchases and Corporate Financing Support
Recovery Mentioned in Economic Assessment... "First Time Since COVID-19"

Bank of Japan (BOJ)
Photo by Reuters Yonhap News

[Asia Economy Reporter Jeong Hyunjin] The Bank of Japan (BOJ) decided on the 17th to keep the base interest rate unchanged and maintain its large-scale monetary easing policy. With the inauguration of the Suga Yoshihide Cabinet, it is expected that the accommodative monetary policy stance pursued by the former Abe Shinzo Cabinet will continue.

According to NHK and other sources, the BOJ held a two-day monetary policy meeting until that day and decided to maintain the monetary easing policy that guides the short-term policy rate at minus (-) 0.1% and the long-term interest rate at around 0%. Policies for market stabilization, such as purchasing exchange-traded funds (ETFs), will also be maintained.

Additionally, regarding the funding support program amounting to 130 trillion yen, which has been in operation since March to help financial institutions expand corporate loans affected by the novel coronavirus infection (COVID-19), the BOJ decided to continue it for the time being. The BOJ assessed that corporate loans by financial institutions are expanding and the market is stabilizing, so no additional measures are necessary at this point.

Regarding the current economic assessment, in July it was described as being in a "very difficult state," but this was revised to "still in a difficult state but recovering amid a gradual resumption of economic activities." According to the Nihon Keizai Shimbun, this is the first time since the outbreak of COVID-19 that the economic assessment has shifted somewhat positively.

Japan's economy is recovering exports to China and automobile production, but with the resurgence of COVID-19 in July and August, consumption recovery centered on food and lodging has been sluggish. The BOJ stated that it is closely monitoring the impact of COVID-19 and will not hesitate to implement additional monetary easing if necessary.

BOJ Governor Kuroda Haruhiko is scheduled to hold a press conference in the afternoon to explain the details of this decision.