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Thursday, May 23, 2024

Japan lowers annual growth target to 3.4%

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TOKYO, Japan—The Bank of Japan revised down its annual growth forecast on Thursday and maintained its ultra-loose monetary policy as the pandemic continues to weigh on the world’s third-largest economy.

In a quarterly report on prices and the economy, the central bank predicted growth of 3.4 percent for the year to March 2022, down from its previous forecast of 3.8 percent.

“Downward pressure stemming from COVID-19 is likely to remain on service consumption, and exports and production are expected to decelerate temporarily due to supply-side constraints,” the report said.

“Thereafter, however, with the impact of COVID-19 waning gradually, mainly due to widespread vaccination, the economy is likely to recover.”

Reflecting this more positive longer-term outlook, the bank revised up its growth forecast   for the fiscal year to March 2023 to 2.9 percent from the previous estimate of 2.7 percent.

The BoJ maintained its longstanding target of two-percent inflation, which remains far off despite years of efforts and prices surging globally.

The unchanged policy decision had been widely expected by market-watchers.

“We do not expect the BoJ will consider amending its core easing policy with yield curve control, even though other central banks have begun to unwind the easing through tapering and rate hikes with recovery of the economy from the pandemic and higher inflation,” said UBS economist Masamichi Adachi ahead of the decision.

“We continue to expect that the BoJ will stay on hold with easing bias, at least until April 2023 when governor (Haruhiko) Kuroda and two deputy governors are scheduled to end their terms.”

The bank’s special lending program to support businesses affected by the pandemic is due to end in March, and “we think the discussion on how to end (or not end) will start in December or January,” Adachi added.  

The central bank also revised down its inflation forecast for this fiscal year from 0.6 percent to flat, but said this was due to a rebasing of the index.


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