Bank of Japan Summary: High downside risks for prospects of economic recovery

Bank of Japan ‘Summary of Opinions’ from April’s monetary policy meeting

Summary headlines via Reuters:
  • Japan’s economy likely to remain in severe state for time being, downside risks high on prospects for recovery
  • short-term slump blamed on pandemic may not necessarily determine medium-, long-term path of Japan’s economy
  • Japan’s economy likely to improve, see prices pick up once pandemic subsides
  • timing of hitting price goal to be delayed as Japan’s economy may face contraction as sharp as during the great depression in 1930s
  • must take steps focused on liquidity provision, also guard against further deterioration in economic conditions
  • must closely monitor financial system, keeping in mind risk some japan bank loans could turn sour
  • appropriate to change BOJ’s forward guidance to one tied to impact of pandemic as economy already lost momentum to hit price goal
  • policymakers must act boldly to avoid repeat of great depression, there is room for more fiscal, monetary policy coordination as Japan faces risk of deflation
  • BOJ must re-examine effectiveness of its current policy to prevent japan from slipping back into deflation
  • BOJ must guide monetary policy keeping in mind chance pandemic may not subside quickly
  • Japan may face ‘reversal rate’ situation earlier than expected if interest rates fall further while financial institutions’ balance sheet becomes eroded by pandemic fallout
 Bank of Japan 'Summary of Opinions' from April's monetary policy meeting