Financial

Bank of Japan Keeps Monetary Policy Firm

The Bank of Japan kept monetary policy steady on Friday and offered a weaker view on inflation than in April, indicating that it will be in no rush to dial back its massive stimulus program.

Japan’s central bank maintained its ultra-loose monetary policy on Friday and downgraded its view on inflation, signaling that it will lag well behind its U.S. and European peers in rolling back crisis-era stimulus.

Market are looking for clues from BOJ Governor Haruhiko Kuroda’s post-meeting briefing on how long the central bank could hold off on whittling down stimulus given recent disappointing weak price growth.

In a widely expected move, the bank kept its short-term interest rate target at minus 0.1 percent and a pledge to guide 10-year government bond yields around zero percent.

Stimulus Program

Bank of Japan Keeps Monetary Policy Firm (2)

The move opposes the European Central Bank’s decision to end its asset-purchase program this year and the U.S. Federal Reserve’s steady rate increases, which indicated a break from policies deployed to battle the 2007-2009 financial crisis.

“Consumer price growth is in a range of 0.5 to 1 percent,” the BOJ said in a statement accompanying the decision. That was a slightly bleaker view than in the previous meeting in April when the central bank said inflation was moving around 1 percent.

The BOJ stuck to its view the economy was expanding moderately, unfazed by a first-quarter contraction that many analysts blame on temporary factors like bad weather.

But it also kept its cautious assessment on prospects for hitting its elusive 2 percent inflation target, saying that inflation expectations were moving sideways.

The delay in pulling out of crisis-era stimulus would leave the BOJ with a lack of ammunition to fight another economic downturn, even as its U.S. and European peers start restocking their tool-kit.

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