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In Tokyo, Japan, on May 22, 2020, a man wearing a protective mask walks by the Bank of Japan headquarters during the coronavirus illness (COVID-19) outbreak. Kim Kyung-Hoon/Reuters (Reuters) – TOKYO, July 13 (Reuters) – In updated quarterly predictions expected on Friday, the Bank of Japan will present a cautiously optimistic assessment of the economy, as continued state-of-emergency restrictions to combat the COVID-19 pandemic damage consumption and leave growth heavily reliant on outside demand. The central bank will also provide details of a new scheme to improve funding for climate-change-related operations, aligning it with its worldwide peers who are stepping up efforts to cope with the economic consequences of climate concerns. The BOJ is expected to keep its yield curve control (YCC) targets of -0.1 percent for short-term interest rates and 0 percent for 10-year bond yields during its two-day policy meeting, which ends on Friday. According to Reuters, the board is expected to reduce its economic growth forecast for the fiscal year ending in March 2022 from the current 4.0 percent estimate published three months ago in new quarterly projections due on Friday. find out more The drop would most likely reflect sluggish consumer demand and the impact of additional restrictions imposed in Olympic host city Tokyo from Monday to August 22, which have crushed policymakers’ hopes for a strong recovery in July-September growth. find out more However, according to separate sources familiar with the BOJ’s thinking, the central bank will maintain its view that the economy is on track for a moderate recovery, and may slightly raise its growth forecast for the coming fiscal year on the assumption that steady vaccinations will boost pent-up demand. “The new state of emergency limitations may postpone the timing of recovery, but they won’t prevent it entirely,” one source said, echoing the sentiments of two others. For fiscal 2022, the BOJ forecasts growth of 2.4 percent. The central bank will also follow up on a plan to launch a new climate-change-focused scheme that was announced last month. The BOJ is expected to offer zero-interest, long-term money to lenders who provide loans for climate-change-related initiatives in an outline of the program due on Friday. The BOJ may debate a number of issues that highlight the difficulty central banks confront in managing climate concerns, such as whether to finance domestic institutions’ offshore loans. It plans to launch the program by the end of 2022. According to the sources, the central bank will also outline other non-monetary policy actions it would take in response to climate change, such as encouraging lenders to increase climate disclosure and plans to do research on the economic effect of climate threats. Leika Kihara contributed reporting, while Ana Nicolaci da Costa edited the piece. The Thomson Reuters Trust Principles are our standards./nRead More

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