The Bank of Japan (BOJ) says it expects the domestic economy to rebound in the first half of 2022 as the easing of Covid and supply-side constraints combine to boost growth.
According to the minutes of the BOJ’s October Monetary Policy Meeting released on Monday, Japan’s economy remains in a “severe situation” due to the impact of Covid-19 both domestically and in the global economy.
The central bank, however, held firm to its previously stated view that pent-up demand will propel economic growth in the first half of next year.
Covid vigilance to “wane”
“The baseline scenario that Japan's economy will recover is expected to be maintained. This is because, although downward pressure on production and exports stemming mainly from supply-side constraints is likely to strengthen in the short run, business fixed investment, for example, is projected to be firm from fiscal 2022,” the BOJ said in an English language release of the minutes.
“Economic improvement is expected to become pronounced in the first half of 2022, when vigilance against COVID-19 and the effects of supply-side constraints are projected to wane,” the BOJ added.
The central bank warned however that there is still a degree of uncertainty over whether the service sector will rebound, and that supply-side risks could be prolonged or become even greater than is currently experienced, as well as downside risks to overseas economies.
China power crisis a concern
In particular the BOJ minutes highlighted the risks to the global economy stemming from China’s current power crisis and said it is necessary to closely monitor whether this will have a larger effect on the world’s second largest economy and the global supply chain.
The BOJ said that the consumer price index is still hovering at around 0% and is likely to remain in moderately positive territory for the near future due to rising energy prices.
Read more: Bank of Japan keeps rates unchanged on Covid-19 risks
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BOJ expects economy to rebound in first half of 2022 - Capital.com
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