In view of the persistently grave economic situation, the central bank decided to stick to its extremely relaxed monetary policy. With the BoJ’s decision, Japanese commercial banks can still get money from the central bank almost free of charge. Loans for business investments and for consumers should remain cheap.
The third largest economy in the world before Germany suffered a record slump in the course of the Corona crisis. Japan is slowly picking itself up again. However, experts reckon it will be years before the Asian economic powerhouse will fully recover from the effects of the global pandemic.
Japan’s monetary authorities began drastically easing monetary reins seven years ago in order to overcome years of deflation with steadily falling prices. Deflation is poisonous for the economy because consumers and businesses are reluctant to buy and invest in anticipation of lower prices. At that time, the Japanese central bank had expected to reach the inflation target of two percent within about two years. The central bank is a long way from that. For the current fiscal year, she even expects the consumer price index to decline by 0.6 percent, according to Thursday.
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