BoJ July meeting Summary of Opinions: Economy to improve in latter half of 2020

The Bank of Japan must scrutinise how monetary policy should be shaped in an era where the world must co-exist with the coronavirus pandemic, a summary of opinions at the July meeting showed on Monday.

At the July rate review, many in the nine-member board also warned of risks to Japan's economic outlook, including the chance that its recovery may be delayed and lead to job losses if the pandemic drags on, the summary showed.

The BOJ kept monetary policy steady at the July 14-15 meeting and maintained its view that the economy would gradually recover from the devastating blow from the pandemic.

BoJ July meeting summary of opinions: japan's economy likely to improve in latter half of this year but must watch impact pandemic has on inflation, growth expectations.

Key notes

  • Timing of japan's economic recovery may be delayed further if coronavirus infection numbers rise again.
  • If impact of pandemic is prolonged, it could lead to job losses, may discourage households and firms from boosting spending.
  • Must scrutinise second-round effect of pandemic on prices, such as impact on inflation expectations, companies' price-setting behaviour.
  • BoJs priority for time being must be on easing corporate funding strains.
  • while maintaining current monetary policy, boj must be vigilant to risk companies face solvency problems.
  • BoJ must deepen study on how monetary policy should be shaped in covid-19 era.
  • BoJ must act quickly if further action is needed, with close cooperation with govt, other central banks.
  • BoJ must strengthen forward guidance to clarify it does not allow return of deflation.
  • BoJ can think about policy response to hit 2% inflation target when there are signs pandemic is being contained.
  • BoJ must be vigilant than ever before to how worsening economy could affect financial system stability.

USD/JPY update

The pair has a good offer in the pipeline from a fundamental basis as the dollar crumble, down 0.25% in the open today in the DXY.

Risk-off flows are destined to the yen in as the dollar loses its safe-haven allure in the face of lower real yields in the US economy and the virus spiralling out of control. 

USD/JPY trades below the 106 handle again to start the week. 


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