TOKYO: On Friday, the Bank of Japan lowered its growth prediction for this fiscal year but maintained its belief that the economy was on track for a moderate recovery, indicating that monetary policy will remain in a holding pattern for some time. The BOJ also unveiled the details of a new scheme targeted at increasing funding for climate-change-related initiatives, which will provide banks with long-term zero-interest loans.
The climate plan will go into effect this year and will run until fiscal 2030. Banks that extend green and sustainability-linked loans, as well as those that invest in green and sustainability-linked bonds, will be eligible for financing from the BOJ. The system will accept transition financing loans as well. Banks that use the plan will not receive any interest incentives, according to the BOJ. The Bank of Japan said on Friday that it expects the economy to grow 3.8 percent in the current fiscal year, which ends in March 2022, down from 4.0 percent anticipated in April. However, it raised its growth prediction for the coming fiscal year to 2.7 percent from 2.4 percent, citing increased immunization rates as a reason.
In a quarterly report, the BOJ stated, “Japan’s economy is anticipated to strengthen… as the pandemic’s impact gradually lessens due to advancements in vaccines.”
“However, the future is exceedingly unpredictable,” it added, adding that “developments surrounding the pandemic could impact domestic and international economy.”
At its two-day rate review that ended on Friday, the central bank kept its yield curve control (YCC) objective constant at -0.1% for short-term interest rates and 0% for 10-year bond yields, as predicted.
The Bank of Japan raised its consumer inflation prediction for the current fiscal year from 0.1 percent to 0.6 percent, owing to recent increases in energy and commodity prices.
Infections have resurfaced, prompting the government of Olympic host city Tokyo to declare a new state of emergency less than two weeks before the Games, dashing policymakers’ hopes for a significant rebound in GDP during the quarter.
As a result of the pandemic’s impact on service consumption, Japan’s economy declined by 3.9 percent on an annualized basis in January-March and is expected to barely grow in the second quarter.
Due to the impact of additional financial curbs, analysts polled by Reuters now forecast the economy to grow 4.2 percent in the current quarter, down from a prediction given last month.
(Leika Kihara and Daniel Leussink contributed reporting; Tetsushi Kajimoto contributed additional reporting; Sam Holmes edited the piece.)/n
