TOKYO- The Bank of Japan maintained ultra-low interest rates on Friday and its pledge to keep supporting the economy until inflation sustainably hits its 2 percent target, suggesting it was in no rush to phase out its massive stimulus program.
The BOJ’s decision contrasts with those of US and European central banks, which in recent meetings have signaled their resolve to keep borrowing costs high to rein in inflation.
Governor Kazuo Ueda said Japanese companies were hiking prices more than expected, preventing inflation from slowing, suggesting that conditions for dialing back monetary support were gradually falling into place.
But he stressed the need to spend more time assessing data, particularly wages and service prices, before raising interest rates.
“We have yet to foresee inflation stably and sustainably achieve our price target. That’s why we must patiently maintain ultra-loose monetary policy,” Ueda told a press briefing after the policy decision.
“Having said that, we will of course shift policy if achievement of our target is foreseen.”
As widely expected, the BOJ maintained its short-term interest rate target of -0.1 percent and that for the 10-year bond yield around 0 percent at a two-day meeting that ended on Friday.
It also left unchanged an allowance band of 50 basis point set either side of the yield target, as well as a new hard cap of 1.0 percent adopted in July.
The central bank made no change in its forward guidance, retaining a pledge to “take additional easing measures without hesitation” if needed – language some market players thought might be changed to take on a more neutral tone.
The yen fell sharply on Ueda’s remarks, dipping at one point to 148.32 to the dollar, taking its depreciation so far this year to more than 11 percent.
