In the Summary of Opinions at BoJ’s October 28/29 monetary policy meeting, it’s noted that “the fight against COVID-19 may be prolonged”. The central bank “should avoid brining a premature end to its current monetary policy responses”. BoJ should “exercise utmost vigilance against the possibility of a sudden change in financial markets and make policy responses flexibly when necessary”
Additionally, one member warned that “if economic recovery is delayed, credit risk might materialize, leading to a risk on the financial system side.” It’s “top priority” to ensure corporate financing and sustain employment”. Also, BoJ should “further look for ways to enhance the sustainability” of ETFs and J-REITs purchases.
“If COVID-19 spreads again and economic activity is pushed down, the CPI could stay in negative territory for a protracted period and deflation might take hold.”
