Bank of Japan to stand pat, extend Covid-19 programme in coming months: survey

[TOKYO] The Bank of Japan will keep policy steady at its meeting next week and extend the duration of its Covid-19 response measures by January at the latest, according to surveyed economists.

All but one of 43 analysts polled by Bloomberg expect the central bank to stand pat at the two-day gathering ending on Oct 29. The economists see the BOJ largely sticking to its existing economic forecasts in its quarterly outlook report.

While little more than a tenth of respondents see the bank extending the deadline for two virus-linked funding programmes and enlarged asset purchases at the meeting, 95 per cent of them expect the decision by January.

The results follow remarks by Governor Haruhiko Kuroda last month that there is a good chance the BOJ will lengthen the time frame of the programme beyond March 31.

At the height of the pandemic the bank created two funding programs worth a total of about US$1 trillion and raised its buying limit on corporate bonds and commercial paper.

"The extension could even come as early as this meeting" said Ryutaro Kono, chief Japan economist at BNP Paribas SA.

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Still, "fiscal policy must play the leading role in supporting the economy with the BOJ helping back that up through yield curve control," he added.

To that end, Prime Minister Yoshihide Suga will compile another extra budget by the end of this year, according to 85 per cent of the economists.

Mr Kuroda said earlier this month that the government can keep the cost of issuing bonds low as the central bank anchors interest rates at ultra low levels to stimulate prices.

The economists see only slight tweaks to the BOJ's growth outlook and no change to its price forecasts, including its -0.5 per cent projection for the year ending in March, according the median estimate in the survey.

BLOOMBERG