Business & Economy

Bank of Japan maintains stimuli over vaccination, moderate recovery

Tokyo, Sep 22 (EFE).- The Bank of Japan decided Wednesday to keep its monetary policy unchanged, after positively evaluating the country’s moderate recovery and the advance of the Covid-19 vaccinations for the normalization of economic activity.

At the end of its two-day monthly meeting Wednesday, the central bank’s monetary policy committee maintained its ultra-flexible policy. It is based on a negative short-term interest rate (-0.1 percent) and a broad program purchase of government bonds and exchange-traded funds to keep 10-year bond yields at about 0 percent.

It also enacted an interest-free loan system for financial institutions that help support state initiatives to combat climate change, proposed at an August meeting and of which it is currently preparing a first draft, and continued with its stimulus programs adopted over Covid-19.

The bank positively valued in its report the moderate recovery in the country, despite the impact of the pandemic on exports and supply chains, which it hopes to alleviate with its decision, while not ruling out “adopting additional easing if necessary”.

The economy expanded by 0.5 percent in the April-June quarter, after a 1.1 percent contraction in the previous one, especially motivated by the drop in consumption, the country’s economic pillar.

Although the bank expects the level of economic activity to remain weak, especially in the face-to-face service sector, heavily affected by the pandemic and the continuing states of emergency (in effect for most of this year in the most populated areas), it said “the economy seemed to recover.”

The improvement will be mainly due to the advance of vaccination and an increase in external demand, the adaptation of the financial situation and government measures, he said in his report.

Regarding prices, the bank said the variation for this year is around zero, since the increase in energy prices is counteracting the impact of Covid-19. The bank maintains its elusive goal of putting inflation at about 2 percent and said it will continue on its current course to achieve this.

Despite the positive tone, the central bank stressed the importance of monitoring the evolution of Covid-19 due to its unpredictability, to maintain the financial system’s stability.

The bank’s most recent meeting on monetary policy took place a week before ruling party leader and Prime Minister Yoshihide Suga term expires, a change analysts believe will have no immediate effect on its stimulus policy. EFE


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