Bloomberg survey: BOJ to stand pat on rates

BOJ keeps monetary policy unchanged amid tepid inflation

"Even if inflation isn't accelerating, the BOJ will probably conclude there's no need to ease policy since it can revise up its growth forecast and sees little risk of a yen spike", said Hiroshi Ugai, chief economist at JPMorgan Securities Japan.

In its quarterly report, the BOJ's policy board said it expects the economy to grow 0.8% in the year ending March 2020, compared with a forecast of 0.6% in the previous report in October. -China trade war hurt exports. Kuroda will meet the press later in the day to explain the bank's latest decision.

At the end of a two-day policy meeting, the central bank chose to keep the short-term interest rate at minus 0.1 percent and guide long-term rates around zero percent.

The BOJ also signalled cautious optimism over the global economy after the United States and China agreed on a preliminary deal to defuse their bitter trade war, saying that risks surrounding the outlook have "subsided somewhat".

At a two-day rate review that ended on Tuesday, the BOJ kept its short-term interest rate target at -0.1 per cent and a pledge to guide 10-year government bond yields around 0 per cent. It also continues to buy huge amounts of government bonds and risky assets in an effort to fire up inflation to its elusive target.

While Kuroda may offer a slightly upbeat view on global prospects than last month, he is seen reiterating the BOJ's resolve to keep policy ultra-loose to support a fragile recovery, analysts say. -China trade talks. There are also geopolitical risks in the Middle East.

The world's third-biggest economy ground to a near halt in July-September and is likely to have contracted in the final quarter of past year as global trade tensions knocked exports.

The Bank's governor Naruhiko Kuroda expects the stimulus packages implemented by the Japanese government, as well as the improving global situation, to diminish the impact of a weakening global demand and the disruption of the global supply chains.

The International Monetary Fund trimmed its growth forecasts for 2019 and 2020 to 2.9% and 3.3%, respectively, and 3.4% in 2021.

Nevertheless, the tax hike and natural disasters were weighing on domestic demand, the bank said. The catalyst behind the weakness in the Forex pair is the fear of contagion of the newly identified Coronavirus in Asia. At closing bell, the 225-issue Nikkei Stock Average declined 211.77 points, or 0.88%, to 23,871.74, while the broader Topix index of all First Section issues on the Tokyo Stock Exchange dropped 8.97 points, or 0.51%, at 1,735.19.

"We had believed the global economy will recover this year after a slowdown last year. The BOJ will continue to pursue powerful monetary easing to achieve 2% inflation".

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