BOJ maintains status-quo in December, extends corporate funding-aid package

The Bank of Japan (BOJ) left its monetary policy setting unchanged after concluding its two-day September monetary policy review meeting on Friday.

The central bank left the key rate steady at -10bps while maintaining a 10yr JGB yield target at 0.00%.

The BOJ board members decided to extend the March 2021 deadline for the package of measures to ease corporate funding strains by 6 months.

Statement summary

Will conduct examination on more effective, sustainable monetary easing framework to achieve price goal.

No need to change yield curve control framework.

Will release outcome of examination of various steps at policy meeting in march next year.

Will conduct review on operations of fund-aid programme.

Japan's economy picking up but pace of recovery to be moderate.

Corporate funding to remain under stress.

To remove upper limit of 100 bln yen on funds provided to each eligible counterparty against loans financial institutions make to cash-strapped firms.

Will consider further extension to fund-aid programme if needed depending on impact of pandemic.

BOJ keeps assessment unchanged from October, says Japan’s economy remains in severe state but picking up.

Japan's economy likely to recover moderately as a trend.

In adjustments to special covid financing program, to combine maximum amount of additional purchases for commercial paper and corp bonds, making a total of 15 trilion yen.

Exports, factory output have continued to increase.

Corp profits, business sentiment have improved gradually.

Private consumption has picked up gradually on the whole but services like food/beverages at low level.

Board member Kataoka opposed YCC decision as it was desirable to further strengthen monetary easing by lowering short, long-term rates in part to encourage firms to make investments for the post covid-19 era.

CPI affected by coronavirus, go to travel; inflation expectations have weakened somewhat.

Market reaction 

USD/JPY is a little changed on the announcement, trading well bid around 103.40 amid a broad US dollar rebound.