As the state of emergency continues to weigh on the economic performance, the Bank of Japan gets more realistic on its growth expectation.
During the conclusion of its two-day event on Friday, policymakers from the central bank announced a 3.8% growth projection for this year. A 2.7% expansion will follow this in 2022.
In a brief context, the BOJ gave 2021 a 4.0% growth outlook back in April, followed by 2.4% in 2022. This conservative downgrade came as the country experiences a resurgence of COVID-19 cases and the emergence of the Delta variant.
As of this writing, 80% of the Japanese elderly population have already received the vaccine, igniting hopes of further recovery.
The country’s older citizens became the vaccination program’s core focus as this chunk of the population is the most susceptible to the deadly effects of the virus.
Moreover, nearly 18% of the total population have already received full inoculation from the COVID-19, translating to 22.7 million citizens. Meanwhile, more than 60 million doses have already been distributed.
An update on the central bank’s monetary policy maintained its yield curve control target at -0.1% for short-term interest rates. This is proceeded by a 0% benchmark for 10-year bond yields, confirming its adamant dovish stance for the time being. This is to aid the still fragile performance of the world’s third-largest economy, despite making significant strides in the past months.
As of late, recovery across sectors remains uneven. The services industry is becoming one of the most subdued sectors for longer than expected. With this, the BOJ needs to equalize its balance sheet here and offer timely structural support for sectors that need it most.
Climate Scheme to Push Through
Another important discussion announced on Friday is the central bank’s climate scheme plans.
The measure aims to provide zero-interest funding towards firms and initiatives that support the mitigation of climate change. It should enter into force late this year and targets to wrap up by 2030. This is in line with the end date of the United Nations Sustainable Development Goals.
For the record, Japan’s incumbent administration asserted commitment towards green development this year.
The government plans to allocate bigger funding on electric vehicle manufacturing, alongside sustainable energy sources. In support of this thrust, the BOJ vowed to support and incentivize banks that provide sustainability loans.