Bank of Japan (BOJ) left its yield curve control (YCC) target unchanged at -0.1% for short-term interest rates and 0% for 10-year bond yields at its two-day rate review that ended on Friday. It will also continue to buy assets such as government bonds and exchange-traded stock funds (ETF).
The Bank decided, by an 8-1 majority vote, to set the following guideline for market operations for the intermeeting period.
The Bank will purchase a necessary amount of Japanese government bonds (JGBs) without setting an upper limit so that 10-year JGB yields will remain at around zero per cent.
The BOJ sharply revised up its consumer inflation forecast for the current fiscal year to 0.6% from 0.1% due in large part to recent rises in energy costs.
Separate from the monetary policy decision, the Bank of Japan has been actively communicating with financial institutions and engaging in international discussions. In addition, the Bank has set up an internal network, the Climate Coordination Hub, to enhance bank-wide initiatives on climate change.
Climate change could exert an extremely large impact on developments in economic activity and prices as well as financial conditions from a medium- to long-term perspective. Supporting the private sector's efforts on climate change from a central bank standpoint will contribute to stabilizing the macroeconomy in the long run. In taking actions from the monetary policy side, the Bank deems it appropriate to give consideration to market neutrality, avoiding direct involvement in micro-level resource allocation as much as possible, BOJ said.
Also, Japan’s central bank downgraded its real GDP forecast for 2021 to 3.8% growth, as compared with the 4% growth forecast made in April.
The Bank will purchase CP and corporate bonds with an upper limit on the amount outstanding of about 20 trillion yen in total until the end of March 2022.
For the time being, the Bank will closely monitor the impact of the novel coronavirus (COVID19) and will not hesitate to take additional easing measures if necessary, and also it expects short- and long-term policy interest rates to remain at their present or lower levels.
Related Tags: