BOJ trims growth forecast but keeps upbeat view on outlook, signals policy pause

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/File photo

TOKYO: The Bank of Japan on Thursday trimmed its economic and price forecasts for the current fiscal year but offered an upbeat outlook for a moderate recovery, signalling that it has delivered enough stimulus for the time being.

As widely expected, the central bank kept monetary policy steady, including a -0.1% target for short-term interest rates and a pledge to guide long-term rates around 0%.

The BOJ also made no changes to a package of steps aimed at easing corporate funding strains, which has become its primary tool to deal with the pandemic-stricken economy.

"Japan's economy will likely improve as a trend as the impact of the coronavirus pandemic gradually subsides, though the pace of recovery will be moderate," the BOJ said in a quarterly report on the economic and price outlook.

"There is very high uncertainty on the outlook," the report said, adding that risk to its economic and price projections were skewed to the downside.

The BOJ, however, upgraded its assessment on exports and output to say they were "increasing." That compared with the view in July, when it said they were falling sharply.

"The BOJ turned more optimistic about the outlook for economic activity today and will probably keep policy settings unchanged over the coming months," said Marcel Thieliant, senior Japan economist at Capital Economics.

BOJ Governor Haruhiko Kuroda will hold a news conference at 3:30 p.m. (0630GMT) to explain the decision.

In the quarterly report, the BOJ said it expects the economy to fall 5.5% in the current fiscal year ending March 2021. That was a bigger drop than a 4.7% slump projected in the previous report in July.

It expects core consumer prices to fall 0.6% in the current fiscal year, slightly more than a 0.5% drop seen in July.

However, the BOJ revised up its forecast for the next fiscal year beginning in April 2021 to a 3.6% increase, against a 3.3% expansion seen in July. - Reuters

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