You are here: Home » International » News » Finance
Business Standard

BOJ to hold fire, signal resolve to work closely with Suga's new cabinet

The BOJ board may also debate how the Federal Reserve's recent shift towards a policy focusing more on jobs

Bank of Japan | Yoshihide Suga | US Federal Reserve

Reuters  |  TOKYO 

Yoshihide Suga. Photo: Reuters
Yoshihide Suga. Photo: Reuters

By Leika Kihara

TOKYO (Reuters) - The is set to keep monetary policy steady on Thursday and stress its readiness to work closely with the new government led by Yoshihide Suga, who has vowed to do whatever it takes to ease the economic blow from the coronavirus.

The BOJ board may also debate how the Federal Reserve's recent shift towards a policy focusing more on jobs, which heightens the chance U.S. interest rates will stay low for a prolonged period, could affect markets.

In a meeting concluding a day after Wednesday's parliament vote officially electing Suga as Japan's new leader, the BOJ is set to maintain its ultra-easy policy and offer a slightly more upbeat view on the economy than in July.

Markets are focusing on what BOJ Governor Haruhiko Kuroda would say at his post-meeting briefing on how the central bank could work with the new government to underpin the economy with its dwindling policy tool-kit.

"There's essentially no monetary easing means left that can effectively stimulate the economy," said Tomoya Masanao, head of PIMCO Japan.

"The BOJ could debate taking steps if the yen spikes for some reason, or if the economy worsens further. But there's very little it can do to battle such market moves."

At its two-day rate review ending on Thursday, the BOJ is expected to maintain its -0.1% short-term interest rate target and a pledge to cap 10-year government bond yields around zero.

It is also seen making no major tweaks to its asset-buying and lending programmes for easing corporate funding strains.

Japan suffered its biggest economic slump on record in the second quarter as COVID-19 hit demand, reinforcing expectations inflation will remain well below the BOJ's 2% target for years.

With the pandemic adding strains to their economies, major central banks including the Fed have been under pressure to review their policy frameworks for a better approach to battle prolonged periods of low growth and subdued inflation.

The BOJ, for its part, conducted a comprehensive review of its quantitative easing policy in 2016 that led to the introduction of yield curve control (YCC).

BOJ officials are thus in no mood to re-examine their framework any time soon, arguing that YCC can sufficiently support government efforts to revive the economy by capping borrowing costs.


(Reporting by Leika Kihara; Editing by Sam Holmes)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Thu, September 17 2020. 08:00 IST