Bank of Japan Minutes June meeting: Economy showing signs of bottoming out

The Bank of Japan minutes of the June interest rate meeting have been released.

A few members said that the BoJ's role was to provide liquidity and that it was important to cooperate with the government while clarifying their respective roles, as Reuters reports:

BoJ June meeting minutes

  • Members agreed tension in global financial markets had abated due to aggressive fiscal and monetary policies.
  • Members shared view markets continued to be nervous due to high uncertainty regarding domestic and overseas economies.
  • A few members said the impact of COVID-19 on the global economy would become prolonged without effective vaccines and medicines.
  • Some members were of view Japan's economy was showing signs of bottoming out recently.
  • Some members said must pay attention to second-round effects of COVID-19 such as how households' and firms' mindset, the behaviour would change long-term.
  • Many members expressed recognition that economic activity could be significantly constrained again if the second wave of COVID-19 occurred.
  •  A  few members said there was risk Japan might fall into deflation again if number of bankruptcies, business discontinuations increased.
  • One member said delay in economic recovery could worsen firms' financial conditions, heighten concern over financial system risks
  • Many members shared view that for time being, it was important to examine effect of series of easing measures taken so far.
  • One member said when policy emphasis shifts from crisis-fighting to promoting economic recovery, the stimulus effects of current monetary policy should be re-examined.
  • Some members said with impact of covid-19 likely to last for prolonged period, there was chance problems for firms would shift from liquidity to solvency.
  • A few members said boj's role was to provide liquidity, important for boj to cooperate with govt while clarifying their respective roles.

Market implications 

The Bank of Japan meetings of late have been non-events in terms of the yen while existing policy measures have been unchanged.

USD/JPY remains in a fairly tight range despite global economic uncertainties and various geopolitical tensions which have weighed on regions equities.

there are limited clear catalysts for any idiosyncratic moves in the pair this week bar what developments we may see in the IS dollar and equities pertaining to the coronavirus backdrop.


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