BoJ Lowers Emergency Funding Measures

The Bank of Japan decided on Friday to scale back its emergency funding measures after its major counterparts the Federal Reserve announced its plan to end its pandemic support efforts and the Bank of England resorted to an immediate rate hike on this week.

At the end of two-day rate setting meeting, the policy board of BoJ, governed by Haruhiko Kuroda, decided to end the additional purchases of commercial paper and corporate bonds at the end of March 2022 as scheduled.

From April 2022, the purchases of securities will be of the same amount as prior to the COVID-19 pandemic, so that the amounts outstanding of these assets will decrease gradually to the pre-pandemic levels, namely, about JPY 2 trillion for commercial paper and about JPY 3 trillion for corporate bonds.

Although the BoJ limited the additional purchases of commercial paper and corporate bonds, it maintained other monetary stimulus unchanged and extended the cut off for applying the special funding facility by six months.

The board maintained the interest rate at -0.1 percent on current accounts that financial institutions maintain at the central bank.

The bank will also continue to purchase a necessary amount of Japanese government bonds without setting an upper limit so that 10-year JGB yields will remain at around zero percent.

Further, the bank extended the deadline for applications for its Covid-19 funds-supplying operations from March 2022 to September 2022, in order to support small and medium-sized firms.

The BoJ will remain among the few central banks that won’t tighten policy for the foreseeable future, Marcel Thieliant, an economist at Capital Economics, said.

The board said Japan’s economy is likely to recover as downward pressure stemming from COVID-19 on services consumption and the effects of supply-side constraints wane. The economy is projected to continue growing at a pace, albeit slower, above its potential growth rate.

Regarding risks to the outlook, the course of COVID-19 and its impact on domestic and overseas economies continue to warrant attention, the board noted.

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