The Bank of Japan is seen standing pat on its main policies at next week’s meeting, while tinkering on the margins of its toolkit by extending aid for pandemic-hit businesses as the country’s fight against the virus drags on.
Some 89% of 44 economists surveyed by Bloomberg see the BOJ keeping in place its negative interest rate and asset purchase settings, with most seeing no change for the foreseeable future.
Around 60% said they expect the bank to prolong its COVID-19-era lending measures past the current expiration in September. Another 39% said they see the bank making the move next month instead.
Analysts expect the BOJ to extend the life of the COVID-19 measures for a third time because Japan’s economy is still in a vulnerable position, in contrast with the U.S. and China where recoveries have taken hold.
A slow vaccine drive has given Prime Minister Yoshihide Suga’s government few options besides on-again-off-again declarations of emergency to try to contain virus flareups. That’s put Japan’s growth on pause, although the vaccination rollout has picked up speed in recent weeks.
Gov. Haruhiko Kuroda last month said the BOJ would "naturally” consider extending its COVID-19 aid, if needed. Under the program, started last spring, the BOJ has bought trillions of yen of corporate bonds and loaned out many trillions more for banks to lend to Japanese businesses.
The widely expected decision by the BOJ to stand pat on its main policy levers would mark a contrast with other central banks that are signaling a move toward throttling back.
The U.S. Federal Reserve, which also meets next week, announced earlier this month it plans to start gradually selling the corporate debt it bought during the height of pandemic panic in markets. Meanwhile, concern about U.S. inflation has investors speculating on the timing of eventual rate hikes from the Fed.
Divergent policy-leanings at the Fed and the BOJ are a big reason the yen is the world’s worst performing major currency this year — a development that’s positive for Japan since it inflates the profits of exporters like Toyota and Hitachi.
Around two-thirds of surveyed economists said the yen would likely weaken further once the Fed actually starts tapering.
On the question of when Japan would vaccinate enough people to eliminate the need for more virus emergencies, half of respondents said they expect that to happen by the end of October.
About a fifth of them don’t see it happening until next year.
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