Bank of Japan Monetary Policy Unchanged as Expected, Raises Inflation Forecast

The Bank of Japan as widely expected kept unchanged its -0.1% target for short-term interest rates, and 0% for the 10-year government bond yield by a 8-1 vote. The BOJ raised its inflation forecast on Thursday but kept guidance on policy bias and says to take more easing steps without hesitation as needed with eye on pandemic’s impact on economy. The bank will remain an outlier among a global wave of central banks tightening monetary policy.

 BoJ Chief Kuroda

BOJ July 2022 Monetary Policy Decision Statement


  • Bank of Japan short-term interest target kept at -0.1%
  • 10-year JGB yield target remains around 0%
  • Repeats April market operation guidance to offer to buy 10-year JGBs at 0.25% every business day unless it is highly likely no bids will be submitted 
  • Keeps guidance on policy bias, says to take more easing steps without hesitation as needed with eye on pandemic’s impact on economy
  • Keeps forward guidance on interest rates, says expects short- and long-term policy rates to remain at ‘present or lower’ levels

BoJ Projection Highlights

Core CPI median forecasts

  • For fiscal 2022 at +2.3% vs +1.9% in April
  • For fiscal 2023 at +1.4% vs +1.1% in April
  • For fiscal 2024 at +1.3% vs +1.1% in April

Real GDP median forecasts

The board cut its economic growth forecast for the current fiscal year to 2.4% from a 2.9% rise seen three months ago.

  • Real GDP median forecast for fiscal 2022 at +2.4% vs +2.9% in April

BOJ quarterly report:

Headlines via Reuters

  • Japan’s economy likely to recover as impact of pandemic, supply constraints subsides
  • Must be vigilant to financial, currency market moves and their impact on japan’s economy, prices
  • Risks to price outlook skewed to upside for time being, roughly balanced thereafter
  • Uncertainty regarding Japan’s economy is very high
  • Japan’s economy picking up as impact of pandemic subsides
  • Inflation expectations are rising
  • Exports rising as a trend but being affected by supply constraints
  • Output is under strong downward pressure
  • Consumption likely to continue increasing even as household real income comes under pressure from rising prices
  • Corporate profits to remain high as a whole thanks in part to weak yen
  • Exports, output likely to continue rising moderately as supply constraint eases
  • Consumer inflation likely to gradually accelerate pace of increase as output gap improves, wages and medium- to long-term inflation expectations heighten
  • Japan’s output gap likely to turn positive around latter half of fiscal 2022
  • Wage pressure likely to gradually strengthen as job market tightens
  • Medium-, long-term inflation expectations heightening moderately albeit at a slower pace than for short-term expectations
  • Underlying rise in inflation likely to push up inflation expectations, lead to sustained rise in price growth
  • Inflation likely to gradually accelerate toward BOJ’s price target, though it will take time 

The next policy statements are due from the BOJ

  • September 22
  • October 28
  • December 20

Source: BoJ

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