Daily Management Review

Japan's central bank keeps discount rate negative


The Bank of Japan (BOJ) has once again kept its interest rate negative at minus 0.1%, the regulator said in a statement following the meeting.

Marco Verch
Marco Verch
Eight participants in the meeting were in favour of keeping the negative interest rate, while one was against it. The Japanese central bank introduced a negative interest rate of minus 0.1% in January 2016.

In addition, the regulator plans to buy an unlimited amount of government bonds and to continue to target the yield on 10-year government bonds at close to zero.

The regulator has also decided to continue additional buybacks of commercial paper (CP) and corporate bonds until the end of March next year. The maximum volume of redemptions totals around 20 trillion yen, the central bank said.

The Japanese central bank has also maintained its annual redemption of exchange-traded funds (ETFs) at around 12 trillion yen and real estate investment trust assets (J-REITs) at around 180 billion yen.

The Japanese central bank has also reiterated that it will monitor the coronavirus situation closely and will not hesitate to introduce additional monetary policy easing measures if necessary. In the short and long term, the Japanese central bank expects the rate to remain at current or lower levels.

According to the central bank's forecast, the country's GDP will grow by 2.8% in fiscal year 2021 (April 1, 2021 - March 31, 2022). An increase of 3.4% was expected in October.

For the next fiscal year, the central bank of Japan expects growth of 3.8% compared with the October estimate of 2.9%. The forecast for fiscal year 2023 has been worsened - an increase of 1.1% is now expected instead of 1.3%.

The inflation forecast for the current fiscal year is kept at zero, the same as in October. In fiscal years 2022 and 2023, the Japanese central bank expects inflation to be 1.1% (0.9% and 1% were expected in October respectively).

source: asia.nikkei.com