The BOJ sticks to global outlier status as central banks elsewhere raise interest rates to tame inflation.
The Bank of Japan has maintained ultra-low interest rates and dovish policy guidance as it seeks to reassure markets that it will continue to swim against a global wave of central banks tightening monetary policy to fight back. against soaring inflation.
The BOJ’s latest move on Thursday came after the US Federal Reserve on Wednesday announced its third straight hike of 0.75 percentage points and announced further hikes, underscoring its determination not to let up in its battle to contain inflation.
As widely expected, the BOJ left unchanged its target of -0.1% for short-term interest rates and 0% for the 10-year government bond yield by a unanimous vote.
The BOJ remains an exception among a global wave of central banks withdrawing stimulus to fight soaring inflation and will likely become the last major monetary authority in the world to have a negative policy rate.
Markets had focused on whether the BOJ would show the first signs of a change in approach by changing its pledge to keep interest rates at “current or lower” levels and stepping up stimulus measures. stimulus needed to support the economy.
BOJ Governor Haruhiko Kuroda is expected to hold a press conference to explain Thursday’s policy decision.
Core consumer inflation in Japan accelerated to 2.8% in August, beating the BOJ’s 2% target for a fifth consecutive month, as pressure on commodity prices and the decline in the yen have widened.
But Kuroda ruled out the possibility of a short-term withdrawal of stimulus, saying wages need to rise more to sustainably hit his 2% inflation target.
Kuroda’s dovish message helped weaken the yen, contradicting government efforts to slow the currency’s decline with verbal threats of yen buying intervention.
Once welcomed for boosting exports, a weak yen has become a headache for Japanese policymakers as it drives up the cost of importing already expensive fuel and raw materials.
The world’s third-largest economy grew 3.5% annualized in April-June, but its recovery has been hampered by a resurgence in COVID-19 infections, supply constraints and rising commodity costs.