The Bank of Japan revised its economic growth forecast downwards on Wednesday while leaving its monetary policy unchanged.

Having previously projected a contraction in the Japanese economy of between 3 and 5 per cent for the fiscal year ending March 2021, the central bank’s policy board now envisions a diminution between 4.5 and 5.7 per cent.

The board maintained its target for short-term interest rates at -0.1 per cent and its target for the 10-year Japanese government bond yield at around 0.

In its quarterly economic outlook report, the BoJ observed: “Japan’s economy has been in an extremely severe situation with the impact of Covid-19 remaining at home and abroad.”

Nonetheless the central bank stated: “Japan’s economy is expected to gradually improve from the latter half of this year. But the pace of recovery will be moderate as the effect of the global coronavirus pandemic will remain.”

Despite its proximity to China, where the novel coronavirus originated, Japan has seen only 22,200 confirmed cases and less than 1,000 deaths.

Having learnt the lessons of the 2003 SARS outbreak, the nation was able to avoid a significant health crisis. However, the economic blow inflicted by the pandemic on global markets has weighed heavily on the Japanese economy.

A ¥40trn ($374bn, £296bn) increase in Japanese bond purchases and US dollar operations, the purchase of ETFs at an annual pace of ¥12trn and a programme of corporate financing of around ¥110trn have helped stabilise the third largest economy in the world.

At the same time, the already heavily indebted nation has seen its  a debt to GDP ratio surge to beyond 230 per cent.

The Nikkei 225 Index closed up 1.59 per cent on Wednesday, standing only 3 per cent below its 2020 starting position.

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