Tokyo, Jul 15 (efe-epa).- Japan’s central bank expects the country’s economy to shrink by 4.7 percent in the 2020 financial year due to the coronavirus pandemic, the institution said in its quarterly “Outlook of Economic Activity and Prices” report on Wednesday.
The Bank of Japan also estimated that the “year-on-year rate of change in the consumer price index (CPI, all items less fresh food) is likely to be negative for the time being, mainly affected by COVID-19 and the past decline in crude oil prices” and will fall by 0.5 percent in the fiscal year between Apr. 1, 2020 and Mar. 31, 2021.
The BoJ published its outlook report at the end of its two-day monthly monetary policy meeting on Wednesday, in which it decided to keep its monetary easing policy unchanged.
This entails keeping unchanged the short-term benchmark interest rate of -0.1 percent, which it has applied since 2016 for deposits of financial institutions in the bank, and keep the 10-year government bond yields at around 0 percent.
“Japan’s economy has been in an extremely severe situation with the impact of COVID-19 remaining at home and abroad,” the central bank said in its report, adding that “exports and industrial production have declined substantially.”
In its previous report, published in April, the BoJ had forecast that the GDP would contract between 3 and 5 percent in the current fiscal year while inflation would be between -0.7 and -0.3 percent, far from the 2 percent annual inflation target fixed by the institution.
“Corporate profits and business sentiment have deteriorated, and business fixed investment has been more or less flat. With the continuing impact of COVID-19, the employment and income situation has been weak,” the bank said.
Although the BoJ expects a gradual improvement in the Japanese economy from the second half of the year with the resumption of economic activity and government stimulus measures, it warned that “the pace of improvement is expected to be only moderate while the impact of COVID-19 remains worldwide.”
The central bank also said the outlook given in its report is “extremely unclear, since it could change depending on the consequences of COVID-19 and the magnitude of their impact on domestic and overseas economies.”
With respect to the 2021 financial year, the central bank expects Japan’s GDP to expand by 3.3 percent and inflation by 0.3 percent. EFE-EPA