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3 Minutes to Read TOKYO, Japan (Reuters) – On Friday, the Bank of Japan is expected to retain its large stimulus package, stressing that global concerns about rising inflation would not detract from efforts to protect the economy from the lingering effects of the coronavirus pandemic. In this illustration photo taken on June 1, 2017, a Japan yen note can be seen. REUTERS/Thomas White/File Photo/Illustration A return of illnesses prompted the government of Olympic host city Tokyo to declare a fresh state of emergency less than two weeks before the Games, putting an end to policymakers’ hopes for a significant rebound in growth throughout the quarter. At a two-day meeting that ends on Friday, the BOJ is widely likely to retain its yield curve management targets of -0.1 percent for short-term interest rates and 0 percent for 10-year bond yields. In a quarterly outlook report due out following the meeting, the BOJ is expected to lower its growth prediction for this fiscal year. According to people familiar with the BOJ’s thinking, the BOJ may raise its growth prediction for next year in the hopes that pent-up demand will emerge as vaccines progress. “The economic impact of the state of emergency is evident. Vaccinations, on the other hand, are becoming more common, and vaccine producers are making a lot of money “one of the sources said On Friday, the BOJ will also describe a proposed new program to increase funding for climate-change-related initiatives. Japan is not immune to global commodity inflation, with enterprises facing higher input costs and some being more eager to pass the expenses on to customers than before. According to the sources, the impact of increased gasoline costs may contribute to a modest upgrade in the BOJ’s inflation prediction for the current fiscal year, which ends in March 2022. Governor Haruhiko Kuroda is anticipated to underscore the BOJ’s resolve to keep its money tap wide open, even as other central banks wind down crisis-mode programs or worry about nagging inflation issues, with inflation well below his 2% target. Due to poor domestic demand and wage growth, many analysts believe that pricing pressures in Japan would not rise significantly. The greater concern for BOJ policymakers, according to the sources, is the risk of rising expenses squeezing corporate earnings, deterring companies from raising wages and harming the economy. According to the BOJ’s April predictions, the GDP will grow 4.0 percent this fiscal year and 2.4 percent the following year. It forecasts 0.1 percent core consumer inflation this fiscal year and 0.8 percent the following year. 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 contributed reporting, and Sam Holmes edited the piece./nRead More

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