The Bank of Japan’s (BOJ) monetary policy announcement in the Asian session saw interest rates remain unchanged at -0.1% and the target for 10 -year Japanese government bond yields was also set at around 0%, as widely expected by the market.
However, in its quarterly outlook report, the central bank has lowered its forecast on core inflation for the current fiscal year to 0.1% from the previous projection made in January of 0.5%.
For the next fiscal year to March 2023, the last year for Haruhiko Kuroda as BOJ Governor, core inflation is projected to increase at 0.8%.
This means that Governor Haruhiko Kuroda does not expect the 2.0% inflation target to be achieved even after 10 years of these major monetary easing measures, including the purchase of government debt and equity as well as interest -free loans to commercial banks.
Meanwhile, policymakers also warned of continued risks to the economic outlook as the rising rise of Covid-19 continues to weigh on consumption.
Meanwhile, the Japanese economy is projected to grow by 4.0% in the current fiscal year. In January, policymakers forecast growth of 3.9%. For fiscal year 2022, growth is expected to increase to 2.4%.
The implementation of tighter sanctions in some Japanese provinces shows why the BOJ continues to be dovish. The declaration of a state of emergency in Tokyo, Osaka, Kyoto and Hyogo has been implemented in response to the continuing increase in Covid-19 cases.
