Stock Groups

BOJ to keep stimulus as deflation risks, supply disruption cloud outlook By Reuters


© Reuters. FILE PHOTO: A man wearing a protective mask walks past the headquarters of Bank of Japan amid the coronavirus disease (COVID-19) outbreak in Tokyo, Japan, May 22, 2020.REUTERS/Kim Kyung-Hoon

By Leika Kihara

TOKYO (Reuters) – The Bank of Japan is expected to keep monetary policy steady on Wednesday as weak growth and deflation risks remain primary concerns, in contrast to major counterparts eyeing a withdrawal of crisis-mode support for their economies.

Analysts say the rate review is happening ahead of the September 29 ruling party leadership race. This may cause the administration to shift its focus from the current policy based upon Shinzo Abe’s “Abenomics” reflationist policies.

The candidates all agree that massive monetary assistance is necessary for the moment, but they differ on their preferred long-term strategy path. This will be an area Governor Haruhikokuroda could be asked about at his post-meeting briefing.

The BOJ will keep its target for short-term interest rates at -0.1%, while the 10-year yields are set at around 0%.

Sources tell Reuters that while the BOJ will not change its views on the economic recovery, it is likely to raise concerns about the potential impact of the pandemic, such as disruptions to supply chains caused by Asian factory closures.

Markets will likely be reminded by the central bank of its determination to maintain a loose monetary policy due to slow consumption and other temporary factors such as reductions in cell phone charges that keep inflation below zero.

Kuroda, an online seminar speaker last week said that Japan’s inflation rate was still very low in comparison to Europe and the United States. The inflation rate should rise steadily and will eventually hit the target of 2%, though not before 2023.

Japan’s economy rebounded from its last year slump due to robust global demand. But, prolonged state of emergency restrictions to fight the COVID-19 pandemic hampered consumption.

In July, core consumer prices declined 0.2% from last year. It was the 12th consecutive month with declines. The reason for this is that weak consumption prevented firms from passing higher raw material costs on to consumers.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. CFDs include futures, stocks, indexes and Forex. Prices are provided not by the exchanges. They are provided by market makers. Therefore, prices can be inaccurate and differ from actual market prices. These prices should not be used for trading. Fusion Media is not responsible for trading losses that may be incurred as a consequence of the use of this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Trading the financial markets is the most risky investment form. Please make sure you are fully aware of all the costs and risks involved.