BOJ to maintain huge stimulus as Ukraine crisis worsens economic woes

A view of signage outside the Bank of Japan headquarters amid the coronavirus disease (COVID-19) outbreak in Tokyo, Japan, May 22, 2020.REUTERS/Kim Kyung-Hoon

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  • Board maintains interest rate targets unchanged
  • Political decision expected between 02:00 and 04:00 GMT
  • BOJ could offer a bleaker view of the economy and maintain recovery forecasts
  • Governor Kuroda will stress his determination to maintain the stimulus
  • Kuroda is expected to brief the media at 06:30 GMT.

TOKYO, March 18 (Reuters) – The Bank of Japan is expected to maintain its massive stimulus on Friday and focus on risks to a fragile economic recovery from the Ukraine crisis, bolstering expectations that it will remain an outlier amid a global shift towards tighter monetary policy.

With inflation expected to approach or even exceed its 2% target in the coming months, the BOJ is in no mood to withdraw stimulus as it views the recent energy-related price hike as transitory and a possible threat to an economy that is just recovering from the coronavirus pandemic.

BOJ Governor Haruhiko Kuroda is expected to stress his determination to maintain huge monetary support until rising inflation is accompanied by strong wage growth.

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“I don’t think Japan is in a situation where inflation reaches 2% on a stable basis, even when the impact of mobile phone fee reductions diminishes and energy prices rise further,” he said. Kuroda in parliament on Thursday. Read more

At a two-day meeting ending Friday, the BOJ is expected to keep its short-term rate target at -0.1% and that for 10-year bonds around 0%.

The BOJ’s dovish tone would stand in stark contrast to the US Federal Reserve, which raised interest rates on Wednesday for the first time since 2018 and outlined aggressive tightening plans to tackle soaring inflation.

With supply disruptions and COVID-19 curbs hampering growth in the current quarter, the BOJ could offer a bleaker view of the economy than in January – when it said there were had “clearer signs of recovery”. Read more

But the central bank is expected to roughly stick to its projection of a moderate economic recovery as policymakers prefer to wait until April for clarity on how the war in Ukraine could affect the outlook for global growth, analysts say. .

The BOJ will conduct a more in-depth economic assessment at a subsequent policy meeting on April 27-28, when it conducts a quarterly review of its growth and inflation estimates.

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Reporting by Leika Kihara; Editing by Kim Coghill

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