Most Economists See BOJ Holding Fire for Rest of 2020: Survey

Most economists expect the Bank of Japan to leave its main policy settings unchanged at next weeks meeting and through the rest of the year.

All but two of 46 economists surveyed by Bloomberg forecast the BOJ to keep policy on hold at the end of its July 14-15 meeting, the most since January. Some 63% now see the bank standing pat through 2020, up from 38% just last month.

Analysts are back to expecting no major action from the BOJ

Source: Bloomberg survey

Earlier this week, people familiar with the matter said the BOJ is likely to stand pat at the meeting as it monitors the impact of measures taken since March to shield the economy from the pandemic. More action isn‘t needed now because financial markets are relatively stable and companies aren’t facing significant funding problems, the people said.

Since March, the BOJ has expanded its purchases of corporate bonds and stock funds, pledged to buy as much government debt as needed to keep yields low and introduced two lending programs aimed at helping struggling companies with financing.

Some 94% of analysts surveyed said the bank has done “enough” or “more than enough” to support the economy.

BOJ Is Said to Likely Stand Pat, Keep Outlook Mostly Unchanged

BOJ Governor Haruhiko Kuroda says cutting interest rates deeper into negative territory is still an option, but economists are increasingly skeptical because of the damage it would do to Japans lenders, who are needed to help the economy recover. Some 98% of analysts now say lowering interest rates is unlikely, up from 91% last month.

Another focus of next weeks meeting will be the quarterly projections for growth and prices, and their level of precision. When the bank last made its forecasts in April it only gave ranges to account for the high uncertainty surrounding the impact of Covid-19.

Some 60% of analysts in the survey said they expect the bank to stick with that approach. If the BOJ gives its median forecasts, it will project the economy shrinking 4.8% this year, according to the survey. That would be near the low end of Aprils projections, which had the economy shrinking between 3% and 5%.

IMF Now Sees Japan GDP Contraction Worse Than During 2009 Crisis

People familiar with the matter said BOJ officials see little need for any major downgrades now, though some small changes might be possible.