BoJ left monetary policy unchanged today as widely expected. Under the yield curve control framework, short-term policy interest rate is held at -0.10%. 10-year JGB yield will be held at around zero percent with JGB purchases. Monetary base will increase at an annual pace of around JPY 80T. The decisions are made with 7-2 vote with Y. Harada and G. Kataoka dissented again.
In the outlook for economic activity and prices report, BoJ said the economy is “likely to continue on an expanding trend throughout the projection period” through fiscal 2021. Exports are projected to “show some weakness” for the time being, but are still expected to be on a “moderate increasing trend”. Domestic demand would “follow an uptrend” against the background of highly accommodative financial conditions and government spending.
Regarding inflation, all item CPI “continued to show relatively weak developments”. But “further price rises are likely”. Year-on-year rate of change in CPI is “likely to increase gradually toward 2 percent”. And both growth and CPI projections are “more or less unchanged” from previous projections.
Risks to economic activity are “skewed to the downside”, particularly regarding overseas developments. Risks to prices are also “skewed to the downside”. The momentum towards 2% inflation target is “maintained” but is “not yet sufficiently firm”.
