Bank of Japan: New Estimate:

 https://mainichi.jp/english/articles/20210121/p2g/00m/0bu/107000c

Article:

TOKYO (Kyodo) -- The Bank of Japan on Thursday cut its economic outlook for the current business year through March and maintained its massive monetary stimulus as Japan struggles to rein in coronavirus infections under a second state of emergency.

Releasing a quarterly report at the end of a two-day policy-setting meeting, the central bank said that the Japanese economy is now expected to shrink 5.6 percent in fiscal 2020, downwardly revised from a 5.5 percent contraction forecast in October.

The BOJ also expected a 0.5 percent year-on-year fall in the core consumer price index excluding volatile fresh foods, against the earlier projected 0.6 percent drop and well below its 2 percent inflation target.

Ideas:

No doubt the Japanese economy is expected to shrink in fiscal 2020 that ends in March. Even though a 5.6 decrease is not good, at least its not double that at a 10 percent decrease.

So its never good that an economy shrinks, but maybe the good news is it could have been much worse.

Of course that is just the overall economy. An economy is very complex, and as such, there might have been some sectors or areas that did see or will see a 10 percent decrease and some sectors or areas might not see a 5.6 percent decrease.

As is the same with businesses. Some might see a 10 percent decrease or worse and some might not see even a 5.6 percent decrease.

The CPI decreasing 0.5 percent has to be taken with caution, as again even with the CPI consumer prices might vary from area to area and form sector to sector. 

And has been mentioned before this might not be the best time for the BOJ to be focused on its goal of a 2 percent inflation rate.

The BOJ should be focused on helping businesses survive the pandemic situation and then later when the economy begins to get somewhat back to normal then begin to make sure the economy can get to a 2 percent inflation rate.

Article;

But in fiscal 2021, the economy measured in real gross domestic product will likely rebound and grow 3.9 percent, the bank said, lifting the previous estimate of a 3.6 percent expansion.

At the policy meeting, the BOJ decided to keep short-term interest rates at minus 0.1 percent while guiding long-term interest rates to around zero percent. It will also continue to buy exchange-traded funds at an annual pace of 12 trillion yen ($116 billion) as part of its massive asset purchase program.

"Japan's economy has picked up as a trend, although it has remained in a severe situation due to the impact of COVID-19 at home and abroad," the BOJ said, tweaking the expression from the previous meeting in December.

Ideas:

The idea that in fiscal 2021 the Japanese economy can rebound and grow 3.9 percent is very positive. But the real idea is if the pandemic situation continues how much will the economy really grow. 

Keeping interest rates as low as possible, to keep money moving through the economy is still a good strategy. 

Of course there are positives and negatives to a negative rate, as banks may feel their profits are being reduced because of the low interest rates.

And if it hasn't done so yet, the BOJ can take measure to help the banks and make sure the banks actually follow the BOJ's ideas and strategies.

Yes the economy might have been trending upward but the new virus surge in December might actually reduce or slow down that upward trend in economic activity.

Article:

But the BOJ also stuck to its view that the economy will likely "follow an improving trend" as the impact of the pandemic wanes, though warning that the pace of recovery will be "only moderate" and that vigilance against the virus is warranted.

The second state of emergency for some areas including Tokyo and Osaka, which account for more than half of the country's economic output, has darkened the outlook. In Japan, COVID-19 vaccinations have yet to begin.

The BOJ board also decided to maintain a spate of steps aimed at supporting corporate finance, including the provision of funding to banks that extend zero-interest loans to pandemic-hit companies as well as buying of commercial paper and corporate bonds.

Ideas:

And important idea to think about is that, and as been reported in some articles, is that some people maybe are beginning to feel the virus is not affecting them and or its not relevant to them. 

Of course that might be a positive and a negative, as the virus is far from over.

And the idea of a moderate recovery is most likely a good response. But at the same time, an economy, and the different sectors and different businesses does not and will not recover at the same rate. 

Some might recover faster than others and some might recover much slower than others.

The same can be said for individual businesses. Some might recover faster, some might recover slower, and unfortunately some might actual never recover despite a moderate recovery in the overall economy.

The BOJ should do whatever it can and use every tool and strategy as needed to help as many businesses as it can. 

Leave no stone unturned in helping businesses and economy.

This is not the time for the idea of "let the market decide" who the survivors will be and who will not survive the pandemic.