By Leika Kihara
TOKYO (Reuters) – The Bank of Japan kept monetary policy steady on Thursday and revised up its economic forecast for next fiscal year, signalling that it has delivered sufficient stimulus for now to cushion the blow from the COVID-19 pandemic.
But the central bank warned of escalating risks to the outlook as new state of emergency measures rolled out this month hit consumption, clouding the outlook amid a fragile recovery.
“Our projections could change depending on developments regarding the pandemic and how they affect domestic and overseas economies. Uncertainty is therefore extremely high,” the BOJ said in a quarterly report on the outlook.
In fresh quarterly projections, the BOJ slightly upgraded next fiscal year’s growth forecast based on hopes that robust exports and the government’s huge spending package will soften the blow from the pandemic.
The central bank, however, said Japan’s economy was “picking up as a trend,” offering a slightly more nuanced view than last month when it said growth was “picking up.”
As widely expected, the BOJ maintained its targets under yield curve control (YCC) at -0.1% for short-term rates and around 0% for 10-year bond yields.
Deputy Governor Masayoshi Amamiya was absent from the meeting because he stayed home as a precaution after a relative took a PCR test for the coronavirus, the BOJ said.
Markets are focusing on Kuroda’s post-meeting briefing for hints on what could come out in the central bank’s March review.
With the pandemic seen forcing it to maintain its stimulus for years to come, the BOJ last month announced a plan to conduct the review to make its policy more sustainable.
Sources have told Reuters the BOJ will discuss ways to scale back its massive asset-buying programme and loosen its grip on YCC to breathe life back into markets numbed by years of heavy-handed intervention.
(Reporting by Leika Kihara, additional reporting by Tetsushi Kajimoto and Kaori Kaneko; Editing by Simon Cameron-Moore & Shri Navaratnam)
