Bank of Japan to Maintain Large-Scale Monetary Easing... GDP Forecast Revised Downward

Interest Rate Held Steady at Financial Policy Meeting on 28-29th... "Additional Monetary Easing Will Be Implemented If Necessary"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] The Bank of Japan (BOJ) has decided to maintain its large-scale monetary easing policy considering the economic impact of the novel coronavirus infection (COVID-19). Taking into account the recent resurgence of COVID-19 in Europe, the United States, and other regions, which is expected to affect the global economy, the BOJ has revised its gross domestic product (GDP) forecast downward.

According to NHK and other sources on the 29th, the BOJ decided at the two-day monetary policy meeting held until that day to maintain the policy of guiding short-term interest rates at -0.1% and long-term interest rates at around 0%.

In addition, as part of the COVID-19 response, the BOJ will continue market stabilization measures such as corporate financing support through the purchase of commercial paper (CP) and corporate bonds introduced since March, and the purchase of exchange-traded funds (ETFs) with an annual cap of 12 trillion yen (approximately 130 trillion won).

The BOJ forecasted that the real GDP growth rate for the 2020 fiscal year will be -5.5%. This is a downward revision from the July forecast of -4.7%. The growth rate for 2021 was revised upward by 0.3 percentage points from the July forecast to 3.6%.

Regarding inflation, the consumer price index excluding fresh food is expected to be -0.6% this year, a downward revision from the July forecast of -0.5%. This is due to the economic activity slump and falling prices caused by the COVID-19 crisis, as well as the impact of the 'Go To Travel' campaign, a tourism promotion project started in July, which is expected to lower prices for services such as food and accommodation.

The BOJ assessed the domestic economic situation as "still difficult, but economic activities are the foundation of resumption and recovery." The BOJ mentioned the resurgence of COVID-19 in Europe and the United States, noting that uncertainty about the global economy's future is increasing, and stated that it will closely monitor the economic impact of COVID-19 and implement additional monetary easing policies if necessary.