The Bank of Japan is leaving interest rates unchanged, keeping them at ultra-low levels
- The Bank of Japan kept its short-term interest rate target at -0.1% and made no changes to its yield curve management policy after a two-day meeting, in line with economists’ expectations.
- Friday’s decision shifts the focus to the central bank’s next meeting, scheduled for July.
Bank of Japan Governor Kazuo Ueda arrives to conduct an interview with a small group of reporters in Tokyo on May 25, 2023.
Richard A. Brooks | AFP | Getty Images
Japan’s central bank maintained its extremely loose monetary policy on Friday, choosing to support fragile economic growth at a time of swirling global uncertainty.
The Bank of Japan kept its short-term interest rate target at -0.1%, in line with economists’ expectations, and made no changes to yield curve steering policy after a two-day meeting.
The Japanese yen fell after the decision, falling as much as 0.3% to around 140.70 per US dollar before losses. The Nikkei 225 reversed similar earlier losses to creep higher.
“With extremely high uncertainty surrounding economies and financial markets at home and abroad, the Bank will patiently continue monetary policy easing while responding flexibly to developments in economic activity and prices as well as financial conditions,” the Bank of Japan said in its policy statement.
The Bank of Japan expects the world’s third-largest economy to “recover moderately around the middle of fiscal 2023” due to pent-up demand. However, it warned that commodity prices and a slowdown in growth abroad are likely to limit growth.
Earlier this month, first-quarter growth in Japan was revised sharply up to 2.7%. Japan’s core inflation rate – which was 3.4% in April – has been consistently above the central bank’s own target of 2% for more than a year.
“The growth rate is highly likely to slow gradually,” the Bank of Japan said. “The year-on-year increase in the CPI (all goods minus fresh food) is likely to slow towards the middle of fiscal year 2023, with a diminishing effect of cost increases being passed on to consumer prices. the increase in import prices.”
Governor Kazuo Ueda is under pressure with inflation well above the BOJ’s 2% target. Wage growth is also expected to pick up after workers received the biggest pay rise in 25 years following negotiations in March with top Japanese companies.
The Bank of Japan’s short-term interest rate target has been held at -0.1% since it first adopted negative interest rates in 2016 to fight deflation and jump-start economic growth. It is keeping current policies to tackle growth it still sees as fragile.
