Bank of Japan revises up next year’s growth forecast, holds fire on policy

TOKYO (Reuters) – The Bank of Japan kept monetary policy steady on Thursday and revised up its economic forecast for next fiscal year, signalling that it has delivered sufficient stimulus for now to cushion the blow from the COVID-19 pandemic.

As widely expected, the central bank kept unchanged its target for short-term interest rates at -0.1% and that for 10-year government bond yields around 0% in a two-day rate review.

In a quarterly review of its projections, the BOJ trimmed its economic forecast for the current year ending in March to a 5.6% contraction from the previous forecast for a 5.5% decline.

But it revised up its growth projection for next fiscal year to a 3.9% expansion from a 3.6% increase forecast in October.

Deputy Governor Masayoshi Amamiya was absent from the meeting because a relative took the PCR test for the coronavirus, the BOJ said.

The BOJ eased policy twice last year mostly by ramping up asset purchases and creating a new facility to funnel funds via financial institutions to cash-strapped firms hit by COVID-19.