Japan’s central bank maintains ultra-loose monetary policy, raises inflation outlook

The BOJ’s move comes ahead of the U.S. Federal Reserve likely hiking its key interest rate again as it continues with its aggressive monetary policy moves to tackle rising inflation. In contrast, the BOJ’s dovish moves are seeing interest rates between Japan and the United States widen, which has triggered dollar buying and the yen’s weakness, as well as caused…

TOKYO, April 28 (Xinhua) — The Bank of Japan (BOJ) on Thursday left its ultra-easy monetary policy unchanged despite the yen’s recent weakness and other central bank’s moves to hike interest rates to tackle inflation, although the bank upped its inflation outlook.

At the conclusion of its two-day policy setting meeting, in a widely expected move, Japan’s central back opted to continue to set short-term benchmark interest rates at minus 0.1 percent.

The bank said it will also continue to guide 10-year Japanese government bond yields to around zero percent to bolster the country’s economic recovery from the negative effects of the coronavirus pandemic.

“Japan’s economy has picked up as a trend, although some weakness has been seen in part, mainly due to the impact of COVID-19 and the rise in commodity prices,” the BOJ said in its assessment.

Following the bank’s policy announcement, the yen, which has plunged recently to a number of 20-year lows versus the U.S. dollar, dropped close to the 130 level, prompting the bank to say its recent fixed-rate government bond buying would continue “every business day.”

This is in a bid to combat a rise in benchmark 10-year bond yields.

The BOJ’s move comes ahead of the U.S. Federal Reserve likely hiking its key interest rate again as it continues with its aggressive monetary policy moves to tackle rising inflation.

In contrast, the BOJ’s dovish moves are seeing interest rates between Japan and the United States widen, which has triggered dollar buying and the yen’s weakness, as well as caused volatility in the stock market here, analysts have said.

However, for the BOJ’s part, it sees such volatility and inflation that U.S. and European central banks are reacting to as temporary, although Japan is dealing with similar inflationary pressures, strategists here pointed out.

The BOJ’s outlook sees the consumer price index, excluding fresh food, rising to a median 1.9 percent in fiscal 2022 from a year earlier.

This compares to its previous outlook a 1.1 percent increase and edging closer to the bank’s inflation target of 2 percent, set in 2013.

The rise in prices, as policymakers have warned, could hurt corporate earnings as well as household incomes, as inflation here is not in tune with a rise in wages or an increase in private demand. Enditem

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