The Bank of Japan has launched an overall review of its monetary policy for the first time since 2016 after the Covid-19 shock crushed hopes of achieving its 2 per cent inflation target.
Expected to report in March 2021, the review will consider the potential for “further effective and sustainable monetary easing”, beyond the large-scale asset purchases and negative interest rates used since 2013 and 2016, respectively.
The decision to launch a review highlights the depth of the central bank’s concern over this year’s slide back towards deflation and its inability to achieve its mandated price stability goals.
The BoJ did not signal whether it hoped to ease policy further or simply sustain its current trajectory for the long-term. It said there would be no change to “yield curve control”, under which it purchases government bonds as needed to keep 10-year yields around zero per cent.
“Given that economic activity and prices are projected to remain under…