BOJ keeps policy steady, nudges up economic growth forecasts

By Ritu,

Capital Sands

The Bank of Japan kept monetary policy steady and nudged up its economic growth forecasts on Tuesday, as the government’s stimulus package and receding pessimism over the global outlook took some pressure off the central bank to top up stimulus.

The BOJ also signaled cautious optimism over the global economy, saying that risks surrounding the outlook have “subsided somewhat.”

Markets will now scrutinize BOJ Governor Haruhiko Kuroda’s post-meeting briefing for clues on how his views on the pros and cons of his stimulus could affect policy decisions this year.

As widely expected, the BOJ kept its short-term interest rate target at -0.1% and a pledge to guide 10-year government bond yields around 0%.

It also maintained a guidance that commits to keeping rates at current low levels, or even to cut them, until risks keeping it from achieving its 2% inflation goal subside.

In a quarterly review of its forecasts, the BOJ revised up its growth projection for the fiscal year beginning in April to 0.9% from an estimate of 0.7% growth made in October, helped by a boost from the government’s fiscal stimulus package.

Japan’s economy is likely to continue expanding moderately as a trend” as the impact of slowing global growth on domestic demand will be limited, the BOJ said in the quarterly report.

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 last year as the U.S.-China trade war knocked exports.

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