Bank of Japan trims growth and price outlook, keeps policy steady

By Leika Kihara

TOKYO (Reuters) - The Bank of Japan on Thursday trimmed its economic and price forecasts for the current fiscal year, heightening expectations it will maintain its massive stimulus for the time being to cushion the blow from COVID-19.

As widely expected, the central bank kept monetary policy steady, including a -0.1% target for short-term interest rates and a pledge to guide long-term rates around 0%.

The BOJ also made no changes to a package of steps aimed at easing corporate funding strains, which have become its primary tool to deal with the pandemic-stricken economy.

"Japan's economy will likely improve as a trend as the impact of the coronavirus pandemic gradually subsides, though the pace of recovery will be moderate," the BOJ said in a quarterly report on the economic and price outlook.

"There is very high uncertainty on the outlook," the report said, adding that risk to its economic and price projections were skewed to the downside.

BOJ Governor Haruhiko Kuroda is expected to hold a news conference to explain the policy decision and the report.

In the quarterly report, the BOJ said it expects the economy to fall 5.5% in the current fiscal year ending March 2021. That was a bigger drop than a 4.7% slump projected in the previous report in July.

It expects core consumer prices to fall 0.6% in the current fiscal year, slightly more than a 0.5% drop seen in July.

However, the BOJ revised up its forecast for the next fiscal year beginning in April 2021 to a 3.6% increase, against a 3.3% expansion seen in July.

 

(Reporting by Leika Kihara, Daniel Leussink, Tetsushi Kajimoto and Kaori Kaneko; Editing by Shri Navaratnam and Sam Holmes)