BoJ keeps monetary conditions on hold – UOB

Senior Economist at UOB Group Alvin Liew assesses the latest BoJ meeting.

Key Quotes

“The Bank of Japan (BOJ), as widely expected, decided to keep its policy measures unchanged at its Monetary Policy Meeting in July. And in its July 2021 outlook for economic activity and prices (The Bank’s View), the BOJ also kept its cautious recovery outlook but downgraded its FY2021 growth forecast slightly although the easing growth trend remains intact until FY2023. The most notable change was the inflation forecast upgrade for FY2021 (due to higher energy prices) but the persistent view of well below 2% inflation forecasts in FY2022/2023 remained intact.”

“July’s policy inaction and the updated inflation outlook did not change our view that the BOJ will not be tightening anytime soon and will maintain its massive stimulus in the next few years, possibly at least until FY2023. Markets are increasing convinced that the BOJ has reached the end of the line on normalization and will remain in a holding pattern on policy until at least April 2023 when Governor Kuroda is scheduled to leave the BOJ. Attention for the BOJ is now likely shifted to dealing with the long-term climate change issue as the central bank starts fleshing out key measures for its green strategy.”