In the Outlook for Economic Activity and Prices, BoJ said, “the economy is likely to recover” with as impact of COVID-19 wanes gradually. Thereafter, it is projected to “continue growing with a virtuous cycle from income to spending intensifying”.

GDP growth forecasts were revised higher, “on the back of stronger domestic and external demand”. CPI forecast for fiscal 2021 was lowered “due to the effects of reduction in mobile phone charges”. But outlook is “highly unclear”. The assumption that impact of COVID-19 will “almost subside” in the middle of the projection period “entail high uncertainties.

In the new economic projections, Fiscal 2021 GDP forecast was raised slightly to 4.0%, up from January’s 3.9%. Fiscal 2022 GDP forecast was raised to 2.4%, from 1.8%. GDP growth is projected to to slow to 1.3% in fiscal 2023.

CPI forecast was downgraded to 0.1% in 2021, from 0.5%. But for fiscal 2022, CPI forecast was upgraded to 0.8%, from 0.7%. CPI is projected to rise further to 1.0% in fiscal 2023.

Full Outlook for Economic Activity and Prices

BoJ kept monetary policy unchanged today as widely expected. Under the yield curve control framework, short-term policy interest rate is held at -0.1%. 10-year JGB yield target is kept at around 0%. The central bank will continue to purchase ETFs and J-REITS with upper limits of about JPY 12T and JPY 180B respectively. CP and Corporate bonds purchases will continue with upper limit of JPY 20Y until the end of September 2021.

BOJ also pledged to continue with QQE with Yield Curve Control “as long as it is necessary” and “continue expanding the monetary base” until core CPI exceeds 2% target in a “stable manner”. It will also “closely monitor” of the impact of COVID-19 and “will not hesitate to take additional easing measures if necessary”.

Full statement here.

Japan CPI core (all-item less fresh food) improved to -0.1% yoy in March, up from -0.4% yoy, above expectation of -0.2% yoy. But that’s still the eight straight months of negative reading. Further fall in core inflation is expected due to drag from mobile phone fee cuts. All-item CPI rose to -0.2% yoy, up from -0.4% yoy. CPI core-core (all-item less fresh food and energy) also ticked up to 0.3% yoy from 0.2% yoy.

Separately, BoJ Governor Haruhiko Kuroda told reiterated to the parliament, “when Japan’s inflation approaches our target, we will deliberate an exit strategy at our policy-setting meeting including details such as the timing and means for selling ETFs.” But for now, inflation remains distant from target.