BOJ to examine economic recovery scenario next week

July 26, 2019

Tokyo--The Bank of Japan is expected to discuss next week whether the country's economy will recover from the second half of this year as foreseen in its current main scenario.

At a two-day monetary policy meeting from Monday, the central bank will look into downside risks to overseas economies, including the U.S.-China trade dispute and heightened tensions in the Middle East.

The BOJ is seen maintaining its current ultraeasy monetary policy, as it deems the price increase trend remains intact.

The bank will also release a quarterly report on the economy and prices.

With consumer price growth slowing on lower energy prices, the BOJ may make a slight downward revision to its fiscal 2019 core inflation forecast, now set at 1.1 pct.

The BOJ gathering will be sandwiched between European and U.S. monetary policy meetings.

In a statement released after a policy meeting Thursday, the European Central Bank signaled possible additional monetary easing in September.

Meanwhile, the U.S. Federal Reserve is seen announcing an interest rate cut after a two-day meeting ending on Wednesday.

If the BOJ takes no monetary easing action, an interest rate gap would narrow between Japan and the United States, triggering a rise in the yen.

Many market watchers in Japan speculate that the BOJ will pledge to continue its ultraeasy monetary policy longer than currently indicated.

In April, the BOJ modified its forward guidance, saying it would maintain its current policy "at least through around spring 2020."

Speaking in Washington on Monday, BOJ Governor Haruhiko Kuroda said the bank will "persistently continue" its powerful monetary easing in order to realize its 2 pct inflation target.

At present, many within the BOJ sound cautious about extending its forward guidance at the upcoming meeting. The bank will reach a decision after assessing foreign exchange market and other developments. Jiji Press