The Bank of Japan remains a very boring central bank to follow with very little in terms of change. This last meeting was no exception and rates were kept at -0.10% and the 10-year bond yield target was also kept at 0.0%. The only dissenter was Mr Katoaka who said that it was desirable to further strengthen monetary easing by lowering short and long-term interest rates, with a view to encouraging firms to make active business fixed investment for the post-COVID-19 era. For years Japan has struggled to see any inflation, so with inflation rising around the world, it was interesting to see that the BoJ expect consumer inflation to remain around 0% for the time being.


The growth outlook for real GDP was tweaked a little with the 2021 median forecast being reduced from 3.8% to 4.0%. However, the 2022 forecast was revised higher to 2.7% from 2.4% and the 2023 median forecast unchanged at 1.3%.

Core inflation

The rise in energy prices was cited as the reason for the core CPI increases. 2021’s forecast was revised up to 0.6% from 0.1% and the 2022 forecast up to 0.9% from 0.8%. 2023’s forecast was unchanged.

Climate change

The Bank announced that it would introduce a new fund-provisioning measure to support private financial institutions’ various efforts in fields related to climate change.


The recent pullback in US 10 year bonds has been a puzzle. However, longer-term the Fed will move before the BoJ. It may only take one good job report from the US. So, look for decent areas of support for medium-term USDJPY buying and just check the US 10 year yields keep moving higher. For now, the JPY strength is on risk-off flows, so that is the dominant force for now.

Read full Bank of Japan report here.