BOJ Maintains Monetary Easing Policy... Raises Inflation Forecast to 2.3%

Economic Growth Rate Forecast for This Fiscal Year Lowered to 2.4%

Bank of Japan Headquarters [Photo by Reuters Yonhap News]

[Asia Economy Reporter Byunghee Park] The Bank of Japan (BOJ) decided on the 21st, at the conclusion of its monetary policy meeting, to keep the benchmark interest rate unchanged and maintain its monetary easing policy stance. While most central banks worldwide, including the U.S. Federal Reserve (Fed), are implementing high-intensity tightening measures to curb inflation, the BOJ alone maintained its easing policy stance. The BOJ expects the consumer price inflation rate for the current fiscal year (April 2022 to March 2023) to exceed the monetary policy target but anticipates it will slow down below the target in the next fiscal year.

According to major foreign media, at the financial policy decision meeting held that day, the BOJ announced it would keep the benchmark interest rate at -0.1% and continue large-scale monetary easing by purchasing long-term government bonds in unlimited amounts as needed to guide the 10-year government bond yield, a long-term interest rate indicator, to around 0%. The interest rate level that serves as the benchmark for bond purchases was also maintained at 0.25%, unchanged from before.

The BOJ revised upward its forecast for the consumer price inflation rate (excluding fresh food) for the current fiscal year from 1.9% to 2.3%. The BOJ also raised its forecast for the consumer price inflation rate for the next fiscal year from 1.1% to 1.4%.

The BOJ stated that although it expects this year's inflation rate to exceed the monetary policy target, the outlook for a slowdown in global economic growth could affect Japan's fragile economy, so it cannot hastily abandon its monetary easing policy stance. The BOJ judged that economic uncertainty remains very high due to factors such as COVID-19 and rising raw material prices.

The economic growth forecast for the current fiscal year was revised downward from 2.9% to 2.4%.

Hiroaki Muto, an economist at Sumitomo Life Insurance, said, "Compared to other countries, Japan's inflation is actually not noticeable," adding, "There is also a lack of clear evidence that the weak yen is damaging the Japanese economy, so there is little reason for the BOJ to change its monetary policy."

With the BOJ maintaining its monetary easing stance, the yen is expected to continue its recent weakening trend.

According to a Ministry of Finance announcement that morning, Japan recorded its largest-ever trade deficit in the first half of this year due to the weak yen and rising raw material prices. Exports in the first half increased by 15.2% year-on-year to 45.9379 trillion yen (approximately 436 trillion won), while imports rose 37.9% to 53.8619 trillion yen, resulting in a trade deficit of 7.9241 trillion yen for the first half.

This content was produced with the assistance of AI translation services.