Japan’s central bank raises inflation outlook – but sticks to ultra-loose monetary policy

Tokyo Japan’s central bank expects prices and the economy to pick up, but is keeping the monetary policy reins relaxed in view of a rapid rise in corona infections. The Bank of Japan (BoJ) announced on Tuesday after two days of deliberations that the country’s economy is likely to grow by 3.8 percent in the coming fiscal year, which begins on April 1, instead of the previously estimated 2.9 percent. The economy is obviously picking up after the severe slump caused by the Corona crisis.

In view of higher energy and raw material costs and a weak yen, prices are likely to rise by 1.1 percent instead of 0.9 percent. However, the Bank of Japan is still a long way from its inflation target of two percent. Against this background, market circles had expected that the BoJ would stick to its course of an aggressively relaxed monetary policy.