Bank Of Japan Monetary Policy Meeting Summary: Economic And Financial Developments On January 20-21, 2021.pdf

Economic Developments:
- Japan's economy shows signs of recovery but remains severe due to COVID-19.
- Uncertainty and unevenness characterize the crisis, with significant regional, expenditure, and industry disparities.
- The reinstatement of a state of emergency in 11 prefectures may impact private consumption (accounting for 60% of Japan's total).
- Business fixed investment appears to have stopped declining but remains weak compared to global leaders like the US and China.
- Recent economic trends have temporarily leveled off due to COVID-19 resurgence, with some weakening.
- Downward pressure from COVID-19 is expected to persist, mainly in face-to-face services, but Japan's economy will maintain a moderate improving trend.

Price Trends:
- Year-on-year CPI is currently negative, expected to turn positive gradually as the economy improves and oil prices decline.
- Prolonged COVID-19 could bring medium to long-term upside and downside price risks.
- The Bank should monitor a wide range of risks while aiming for the 2% price stability target.

Monetary Policy:
- Monetary easing measures since March have been effective; maintain support for firm financing and financial market stability.
- Maintain current market operation and asset purchase guidelines.
- Scarring effects of COVID-19 on Japan's economy should be monitored through growth expectations, savings rates, inflation, and financial system developments.
- Strengthen monetary easing stance to combat increased deflation risks, focusing on yield curve control and future policy commitment.
- Assess the effectiveness and sustainability of large-scale monetary easing, considering its side effects on financial intermediation and markets.
- Prioritize flexible and responsive monetary policy conduct during normal times and in response to changing circumstances.
- Reaffirm the 2% price stability target and maintain an accommodative regime.
- Analyze and assess policy effects for further sustainable and effective responses as the economic recovery takes longer than expected.