Summary of Opinions of BoJ’s July 14-15 meeting reiterated that the economy is “likely to improve gradually” from H2, but the pace is expected to be “only moderate” as coronavirus impact remains. The economy is “unlikely” to return to pre-pandemic level “even in fiscal 2022”, since it will take time for a “structural change” to overcome the pandemic impacts.
Also, the economic shock of COVID-19 seems to be “largely attributable to a negative demand shock”. There are signs that a decline in short-term inflation expectations is affecting medium- to long-term ones. “Downward pressure will likely be exerted on prices for the time being”.
One opinion noted that it’s appropriate to ” revise the forward guidance to make it a more powerful one that does not allow deflation to take hold and leads to additional easing measures under the concrete conditions related to prices.” One said BoJ should examine the ” transmission channels and effects of policy measures while paying attention to risks that prices and growth expectations will decline further and that such situation will last for a protracted period”.
