Japan Monetary Policy March 2022


Japan: Bank of Japan keeps rates unchanged at March meeting

March 18, 2022

At its meeting ending on 18 March, the Bank of Japan (BoJ) kept its monetary policy parameters unchanged, as widely expected by market analysts. In terms of rates, the BoJ left the short-term policy rate for current accounts held by financial institutions at the Bank unchanged at minus 0.10%. It also continued to not set an upper limit on the amount of Japanese government bonds (JGBs) it will purchase in order to cap the 10-year JGB yield at around 0.00%. Regarding asset purchases, the Bank kept its buying commitments unchanged for Q1 2022, adding that it would gradually reduce its purchases to pre-pandemic levels from April onwards.

The policy decisions came in stark contrast to Japan’s G7 peers, who have either strongly hinted at or already begun to normalize monetary policy. Instead, the BoJ’s decision was based on a lack of demand-driven inflation, while the Bank highlighted the potential impact to economic activity stemming from the heightened uncertainty regarding the Russia-Ukraine war and the ongoing pandemic. As such, it felt that it had continued grounds to take a wait-and-see approach.

Looking ahead, the BoJ maintained its dovish tone in its communiqué, again stating that it will “closely monitor the impact of Covid-19 and will not hesitate to take additional easing measures if necessary”, while it also “expects short- and long-term policy interest rates to remain at their present or lower levels”.

Regarding future policy moves, Alvin Liew, senior economist at United Overseas Bank, commented:

“[…] While domestic demand remains weak, we are certain that the BoJ will keep its current easy monetary policy intact for 2022 and will maintain its massive stimulus, possibly at least until FY 2023. During BoJ Governor Kuroda’s post-MPM press conference, he said “there is absolutely no need for Japan to hike rates right now” and that “it’s not appropriate to tighten monetary policy as prices rising to around 2% is due largely to a rise in import prices”, clearly spelling out that the BOJ is not considering at all rate hikes or tweaking current monetary easing.”

The next monetary policy meeting is set to end on 28 April.

All FocusEconomics panelists expect the BoJ’s short-term policy rate to remain at minus 0.10% through to the end of 2023. The 10-year bond yield is forecast to be 0.13% at the end of 2022 and 0.14% at the end of 2023. Meanwhile, panelists see the yen trading at 114.8 per USD at the end of 2022 and 113.1 per USD at the end of 2023.

Author:, Economist

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Japan Monetary Policy Chart

Japan Monetary Policy March 2022 0

Note: Monetary base in JPY trillion and 10-year bond yields in %.
Source: Bank of Japan (BoJ) and Refinitiv.

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