Daily Management Review

Japan’s Annual Growth Forecast Cut By BOJ


Japan’s Annual Growth Forecast Cut By BOJ
While holding to its view of the Japanese economy settled to register a moderate recovery from the Covid-19 pandemic hit, the Bank of Japan cut its growth forecast for the current fiscal year which signalled that it will hold on to the current trend of its monetary policy at least for the time being, 
An outline of its new scheme designed to boost funding for activities and projects that address climate change was released by the BOJ after its two-day rate review that ended on Friday.
Under the outline of its new scheme, the central bank will provide zero-interest funds for a period of a one year that will carry the option of being rolled over any number of times to financial institutions that will be directed for boosting loans or investment that address climate change.
According to expectations of economists, the BOJ did not change its yield curve control (YCC) target at -0.1% for short-term interest rates and 0% for 10-year bond yields.
The BOJ expects the Japanese economy to grow at 3.8 per cent during the current fiscal year outline and at 2.7 per cent for the next fiscal year, the central bank said in fresh quarterly projections released on Friday.
In its previous forecast in April this year, the growth forecast for the Japanese economy by BOJ for the current fiscal year was at 4.0 per cent and 2.4 per cent for the following fiscal year.
On the other hand, a Reuters’ poll of economists suggested that Japanese exports likely grew in June because of strong global demand for machinery and technology related goods and with sharp rebound of shipments form the pandemic induced lows of last year for the same period.
According to the expectations of economists, there was likely a 42 per cent year on year surge in Japan’s exports for June – marking the fourth consecutive month of double-digit growth, even while economists noted that the annual export growth rate for June was largely skewed by pandemic induced tanking of exports in June last year. Even though the manufacturing of cars in Japan has suffered because of a global chip shortage, there was strong export growth.
The re-imposition of a state of coronavirus emergency curbs in Tokyo is expected to result in weakening of consumer spending, policy makers are betting on growth in external demand for a speedy recovery of the third largest economy of the world.
In the January-March quarter, Japan's economy shrank an annualised 3.9 per cent and it is likely that there was barely any growth in the second quarter as the pandemic hit service spending in the domestic economy during the quarter. 
The poll of economists also expects a slight pickup in core consumer inflation in June which underscores the challenge for the BOJ in its efforts to achieve its 2 per cent inflation target. 
In May this year, exports in Japan surged by 49.6 per cent which was the highest monthly growth since April 1980. But that was against severely depressed export demand in the same month a year ago because of the pandemic hit.