Home Interest rate BOJ keeps interest rates ultra-low and defies global tightening trend

BOJ keeps interest rates ultra-low and defies global tightening trend

  • BOJ maintains short- and long-term rate targets
  • No change to dovish policy guidelines
  • Board of Directors Raises Price Forecast, Predicts 2.9% Inflation for FY2022
  • Governor Kuroda is expected to brief the media at 06:30 GMT

TOKYO, Oct 28 (Reuters) – The Bank of Japan kept interest rates ultra-low on Friday and maintained its dovish stance, cementing its status as an exception among global central banks tightening monetary policy, as recession fears cloud the prospects for a strong recovery.

In new quarterly projections, the BOJ has revised up its forecast for core consumer inflation to 2.9% for the current fiscal year ending March 2023, from an estimate of 2.3. % made in July and well exceeding its target of 2%.

It also raised its inflation forecast for fiscal year 2023 to 1.6% from 1.4%, nodding to recent growing signs that companies are actively passing on rising commodity costs to households.

Despite the higher inflation outlook, the central bank maintained its policy guidance that its short-term and long-term interest rate targets will remain at “current or lower levels.”

As widely expected, the BOJ also left unchanged its target of -0.1% for short-term interest rates and its promise to guide 10-year bond yields around 0%.

“Risks to the economic outlook are on the downside, while those to the price outlook are on the upside,” the BOJ said in a report on quarterly projections.

The announcement follows the European Central Bank’s decision to raise interest rates again on Thursday, continuing its efforts to prevent rapid price growth from taking hold. The US Federal Reserve is also expected to raise rates next week.

Investor attention will focus on BOJ Governor Haruhiko Kuroda’s post-meeting briefing for clues on when a possible exit from the ultra-loose policy will take place.

Although more subdued than in other major economies, core consumer inflation in Japan hit an eight-year high of 3% in September, beating the BOJ’s 2% target for six consecutive months. .

Core consumer inflation in Tokyo, Japan’s capital, seen as a leading indicator of national numbers, hit a 33-year high of 3.4% in October, data showed on Friday, a sign of growing pressure on prices.

Kuroda stressed the need to maintain an ultra-loose policy in the view that the recent cost inflation will prove temporary.

The BOJ’s ultra-loose policy has helped trigger sharp declines in the yen that inflate the cost of importing already expensive fuel and raw materials, prompting the government to intervene in the market to support the currency.

Reporting by Leika Kihara; Editing by Sam Holmes

Our standards: The Thomson Reuters Trust Principles.