2020.10.2906:46:00UTC+00BoJ Keeps Monetary Policy Unchanged; Cuts 2020 GDP Forecast

Japan's central bank maintained its massive monetary policy easing as widely expected, but downgraded its GDP projection for the current fiscal year, citing a delay in recovery in services demand.

The Policy Board of the BoJ governed by Haruhiko Kuroda voted 8-1 to retain the interest rate at -0.1 percent on current accounts that financial institutions maintain at the central bank.

The bank will continue to purchase necessary amount of Japanese government bonds without setting an upper limit so that 10-year JGB yields will remain at around zero percent.

The bank will actively buy exchange-traded funds and Japan real estate investment trusts so that their outstanding amounts will increase at annual paces with the upper limit of about JPY 12 trillion and around JPY 180 billion, respectively.

As for CP and corporate bonds, the bank will maintain their outstanding amounts at about JPY 2 trillion and JPY 3 trillion, respectively.

The bank said that the economy is likely to follow an improving trend with economic activity resuming and the impact of the coronavirus waning gradually. But the pace is forecast to be moderate.

The economy is forecast to shrink 5.5 percent in the fiscal 2020, weaker than the previous outlook of -4.7 percent. Overall consumer prices are expected to drop 0.6 percent versus a 0.5 percent fall projected in July.

The growth outlook for fiscal 2021 was raised to 3.6 percent from 3.3 percent and that for 2022 to 1.6 percent from 1.5 percent.

Consumer prices are projected to rise 0.4 percent in the fiscal 2021 compared to the previous outlook of 0.3 percent. At the same time, the inflation outlook for the fiscal 2022 was retained at 0.7 percent.

The bank said the outlook for both economic activity and prices is extremely unclear, since it could change depending on the consequences of Covid-19 and the magnitude of their impact on domestic and overseas economies.