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At the last BoJ policy meeting on April 27 there were no surprises. Interest rates remained at 0.10%. The Yield Curve Control (YCC) was maintained to target 10 year JGB yields at 0.0%. The vote on YCC was made by 8-1 votes with Katoaka the dissenter.

Better times ahead

The general outlook is that the economy is seen to be improving, but the pace of the rebound is seen as moderate. There was the mandatory explanation regarding the uncertainties surrounding COVID-19, but the general financial system was considered stable by the Bank of Japan. The real GDP projections were revised higher:

• Fiscal 2021 median forecast raised to 4.0% from 3.9%
• Fiscal 2022 median forecast raised to 2.4% from 1.8%
• Fiscal 2023 median forecast raised to 1.3%

At the previous central bank meeting the Bank of Japan’s ETF target was removed and the BoJ was only to buy ETF’s linked to the TOPIX. So, it was widely expected that there would nothing of any significant at the latest meeting. Note that although GDP was revised up marginally, inflation was also revised down this year.

• Fiscal 2021 median forecast cut to 0.1% from 0.5%
• Fiscal 2022 median forecast raised to 0.8% from 0.7%
• Fiscal 2023 median forecast at 1.0%

The key takeaway

The only takeaway is that there is no change to the perspective that the Bank of Japan is ready to step in to support Japanese equity markets if they are needed to. Deflationary pressures remain and no no change expected for the foreseeable future.

You can read the full statement here.