Bank of Japan short-term interest target kept at -0.1%

  • 10 year JGB yield target remains around 0%
  • ETF buy cap stays at 12tln yen

The Bank has edged up its forecasts for economic growth, the Bank says its forecasts are based on vaccine rollout easing the impact of the pandemic:

  • real GDP median forecast for fiscal 2021 at 4.0% vs +3.9% in January
  • real GDP median forecast for fiscal 2022 at 2.4% vs +1.8% in January
  • real GDP median forecast for fiscal 2023 at 1.3%

On the inflation front (the BOJ target is 2%)

  • the BOJ said it expects core consumer inflation to hit 0.1% in the current fiscal year that began in April (0.5% was projected in January)

For the CPI further ahead:

  • expects core consumer inflation to hit 0.8% in 2022
  • 1.0% in fiscal 2023

BOJ Quarterly report:

  • Japan's economy likely to improve as a trend but pace of recovery to remain moderate
  • consumer prices likely to fall for the time being
  • risks to economic outlook skewed to the downside for the time being
  • expect financial intermediation to play out smoothly under financial system stability
  • there is big uncertainty on outlook
  • likely to avoid downward pressure strengthening on real economy from financial front
  • Japan's financial system remains stable as a whole
  • if coronavirus infections increase more than expected, worsening of the real economy will affect financial system stability, further putting downward pressure on real economy
  • at this point, such risk is not seen large but need to closely watch outlook

The comments from the Bank on financial stability are relatively upbeat, or at least not dour. Easy policy would therefore not seem to be under threat from that front.

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And, still to come, due at 0630GMT, Bank of Japan Governor Kuroda news conference.