Bank of Japan July 2021 monetary policy meeting

Keeps monetary policy steady

  • maintains 10-year JGB yield target around 0%
  • maintains short-term interest rate target at -0.1%

Growth forecasts downgraded for this fiscal year:

  • real GDP median forecast for fiscal 2021/22 at +3.8% vs +4.0% in April
  • real GDP median forecast for fiscal 2022/23 at +2.7% vs +2.4% in April
  • real GDP median forecast for fiscal 2023/24 at +1.3% vs +1.3% in April

Core CPI forecasts ahead:

  • Fiscal 2021 0.6% y/y vs. 0.1% in April
  • FY 2022 0.9% vs. 0.8%
  • FY 2023 1.0% vs. 1.0%

The BOJ see big gains for the inflation in the current fiscal year but more muted gains after that.

From the Bank's quarterly report, Headlines via Reuters:

  • Japan's consumer inflation likely to hover around 0% for the time being
  • consumer inflation likely to gradually accelerate
  • economic outlook highly uncertain, swayed by pandemic developments
  • the economy remains in severe state but picking up as a trend
  • risks to Japan's economic outlook skewed to downside for time being, balanced longer term
  • risks to price outlook skewed to downside
  • medium-, long-term inflation expectations moving sideways
  • long-term inflation expectations likely to heighten ahead
  • financial intermediation may stagnate if bank profits come under prolonged pressure from covid-19
  • corporate profit continue to improve although recent rises in commodity costs will weigh

In the immediate aftermath of the statement and report USD/JPY is barely changed:

USD/JPY chart boj july 16 2021

The Bank of Japan also released an outline of its new program aimed at boosting funding for activities combating climate change

  • to offer zero-interest funds for a period of a year
  • can be rolled over any number of times
  • to financial institutions increasing loans or investment for fighting climate change