Bank of Japan Keeps Rates Unchanged in June, Highlights High Uncertainty in Japanese Economic Recovery

In line with expectations, the Bank of Japan (BoJ) has maintained its existing interest rate levels in its June policy decision. During the meeting, the BoJ unanimously agreed to keep the yield curve control (YCC) unchanged, maintaining short-term rates at -0.1% and the target for 10-year government bond yields at 0.00%.

In addition to the interest rate policy, the BoJ stated that it will maintain the annual limit on ETF purchases at ¥12 trillion. Furthermore, there were no changes to the framework of the supplementary deposit facility and the interest rate scheme for promoting lending. The BoJ affirmed that it stands ready to implement further easing measures if necessary.

Regarding the Japanese economy and inflation situation, the BoJ presented the following viewpoints:

  1. The Japanese economy may continue its moderate recovery, but there is high uncertainty. This reflects the uncertainty in the current global economic situation and concerns about the subsequent development of the pandemic.
  2. Exports and output show a sideways trend without clear signs of improvement.
  3. Business fixed investment is growing moderately, possibly indicating a relatively optimistic outlook among businesses regarding future economic conditions.
  4. Private consumption also exhibits a moderate growth trend.
  5. Inflation expectations are leveling off after a period of growth.
  6. The core inflation rate in Japan may experience a slowdown in its growth pace in the mid-term of this fiscal year.

Overall, the Bank of Japan maintains a cautiously optimistic outlook for Japan’s economic recovery and expresses its readiness to take further easing measures to support economic growth when necessary. However, high uncertainty remains one of the main challenges facing the Japanese economy, necessitating close monitoring of global economic conditions and the pandemic’s development.