BOJ leaves its monetary policy unchanged, as widely expected

Bank of Japan monetary policy announcement.

  • short-term interest target remains -0.1%
  • 10 year JGB target remains around 0%
  • Repeats April market ops guidance to offer to buy 10-year JGBs at 0.25% every business day unless it is highly likely no bids will be submitted
  • Keeps guidance on policy bias, says to take more easing steps without hesitation as needed with eye on pandemic’s impact on economy
  • Keeps forward guidance on interest rates, says expects short- and long-term policy rates to remain at ‘present or lower’ levels

Core CPI median forecast for fiscal 2022 at +2.3% vs +1.9% in April

  • For fiscal 2023 at +1.4% vs +1.1% in April
  • For fiscal 2024 at +1.3% vs +1.1% in April

From the BOJ quarterly report:

  • Japan’s economy likely to recover as impact of pandemic, supply constraints subsides
  • Must be vigilant to financial, currency market moves and their impact on japan’s economy, prices
  • Risks to price outlook skewed to upside for time being, roughly balanced thereafter
  • Uncertainty regarding japan’s economy is very high
  • Japan’s economy picking up as impact of pandemic subsides
  • expectations are rising
  • Exports rising as a trend but being affected by supply constraints
  • Output is under strong downward pressure
  • Consumption likely to continue increasing even as household real income comes under pressure from rising prices
  • Corporate profits to remain high as a whole thanks in part to weak yen
  • Exports, output likely to continue rising moderately as supply constraint eases
  • Consumer inflation likely to gradually accelerate pace of increase as output gap improves, wages and medium- to long-term inflation expectations heighten
  • Japan’s output gap likely to turn positive around latter half of fiscal 2022
More from the quarterly report – these should give some encouragement to analysts looking for a change from the BOJ at coming meetings. Noting inflation expectations are rising.
  • Wage pressure likely to gradually strengthen as job market tightens
  • Medium-, long-term inflation expectations heightening moderately albeit at a slower pace than for short-term expectations
  • Underlying rise in inflation likely to push up inflation expectations, lead to sustained rise in price growth
  • Inflation likely to gradually accelerate toward BOJ’s price target, though it will take time

The next policy statements are due from the BOJ on

  • September 22
  • October 28
  • December 20

I wonder if we can see a change by the end of the year? The first thing likely to go is the 0.25% ceiling on 10 year JGBs.