The bank also announced that the country will likely miss the 2% inflation target.
The Bank of Japan announced its decision to keep the cash rate unchanged at 0.1%, in line with expectations. It also announced that it will continue with its bond purchasing program.
The bank also revised some of its forecasts. Now, the Japanese GDP is expected to grow by 4% in 2021, while it is expected to slow down to a 2.4% growth in 2022 and rise by 1.3% in 2023. Previously, the members of the committee had expected a 3.9% and 1.8% growth rate in 2021 and 2022, respectively.
The bank also announced that the country will likely miss the 2% inflation target. This is remarkable, because the Bank of Japan has struggled for years to bring up inflation levels, without success.
Excluding food and energy prices, the Consumer Price Index (CPI) is expected to rise by 0.1% in 2021, contrasting with the previous forecast’s 0.5% rise. In 2022, the core CPI is expected to rise by 0.8%, contrasting with the previous forecast’s 0.7% rise. The core CPI is now expected to rise by 1% in 2023.
The Bank of Japan commented that the economy is probably going to recover, even though the level of economic activity is expected to be lower than pre-pandemic levels. In order to counter the effects of the pandemic on economic performance, the bank pledged to take additional easing steps.
"Japan's economy is likely to recover, though the level of activity will be lower than before the spread of the pandemic mainly for sectors that offer face-to-face services," commented the Bank of Japan in its report. "We will take additional monetary easing steps without hesitation as needed with a close eye on the impact of the pandemic.”
Right after the announcement, Bank of Japan Governor Haruhiko Kuroda commented that if service sectors continue being under pressure, the bank will extend the deadline of its pandemic relief program. He also pledged to continue supporting corporate funding for sectors that have been heavily hit by the pandemic.
Just like the rest of the world's governments, Japan is now attempting to contain the spread of the COVID-19 virus, which so far has infected 566,863 individuals with 9,972 deaths. Last week, the government announced tougher restrictions in Tokyo and the prefectures of Osaka, Kyoto and Hyogo.
The government is now pushing for the opening of vaccination centers with the capacity to provide 10,000 dosages per day in an attempt to speed up vaccinations. Medically certified Self-Defense Forces would be in charge of administering the vaccines. So far, around 2.7 million dosages have been administered.
The Japanese yen fell against the US dollar right after the announcement. By 9:49 GMT, the Japanese yen rose by 0.22% against the US dollar, hitting the 108.31 level.
Last week, the yen lost 0.79% against the US dollar, losing ground for the third consecutive week.