TOKYO – The Bank of Japan opted on Thursday to keep its monetary policy unchanged, resisting the trend of some other central banks of adopting additional measures to stimulate growth amid the current climate of uncertainty.
At the end of its two-day monetary policy meeting on Thursday, the Japanese central bank decided – by 7 votes in favor and 2 against – to keep its short-term bank deposit interest rates at -0.1 percent and 10-year government bond yields at around 0 percent.
The bank also decided to continue its asset purchase program “in a flexible manner” to ensure that the amount outstanding increases at an annual pace of about 80 trillion yen ($741 billion) and to achieve its inflation target of 2 percent.
In its report, the BoJ admitted that the consumer price index (CPI) currently stood at “around 0.5 percent” although “inflation expectations have been more or less unchanged.”
BoJ’s announcement came hours after the United States Federal Reserve voted to lower its benchmark interest rate by a quarter-point amid growing concerns about the impact of the US-China trade war on the global economy and a week after the European Central Bank reduced rates for the first time in three years.
The Japanese central bank also expressed its intention to continue its massive stimulus program adopted in 2013 to achieve the price stability target of 2 percent “as long as it is necessary” and said it will “continue expanding the monetary base until the year-on-year rate of increase in the observed CPI (all items less fresh food) exceeds 2 percent and stays above the target in a stable manner.”
The institution said it intended to maintain its current policy of extremely low short-term and long-term interest rates “at least through around spring 2020” taking into account “uncertainties regarding economic activity and prices including developments in overseas economies and the effects of the scheduled consumption tax hike” from Oct. 1.
The BoJ also noted that, despite being affected by economic slowdown in other countries, it expects the Japanese economy to “continue on a moderate expanding trend.”
Some analysts had expected the BoJ to follow the trend of global change while others felt that it would hold off acting for a while in case Japan’s economy was seriously impacted by the increase in the consumption tax or by the ongoing global trade disputes.