The Bank of Japan is expected to maintain its monetary policy unchanged at the upcoming meeting next week and is likely to sound more optimistic about Japan’s economic growth in the wake of the recently signed US-China phase one trade deal and receding geopolitical tensions. However, the BOJ’s ultra-loose monetary policy is likely to remain in effect for some more time as trade tensions have not yet abated entirely even as Japan grapples with the after effects of the recent sales tax hike.

The latest BOJ monetary policy meeting concludes next Tuesday, and it is likely that Japan’s central bank will maintain interest rates around -0.1% and 10-year government bonds around 0%. However, the bank is likely to revise its economic growth projections higher for the next fiscal year which starts in April 2020.

Recently announced fiscal stimulus measures rolled out by the government, the reduction in trade tensions between the US and China, the fading threat of geopolitical tensions in the Middle East as the US and Iran step back from the brink of war are expected to keep the BOJ more upbeat about Japan’s GDP next year. In its last projects during October 2019, the central bank had forecast economic growth for the fiscal year ending 2020 to touch 0.7% and rise up to 1.0% in the next year.