TOKYO, June 15 ― Japan’s central bank maintained its ultra-loose monetary policy today and downgraded its view on inflation, signalling that it will lag well behind its US and European peers in rolling back crisis-era stimulus.
Markets are on the lookout 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 disappointingly weak price growth.
As widely expected, the Bank of Japan kept its short-term interest rate target at minus 0.1 per cent and a pledge to guide 10-year government bond yields around zero per cent.
The move contrasts with the European Central Bank’s decision to end its asset-purchase programme this year and the US Federal Reserve’s steady rate increases, which signalled a break from policies deployed to battle the 2007-2009 financial crisis.
“Consumer price growth is in a range of 0.5 to 1 per cent,” 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 per cent.
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 maintained its cautious assessment on prospects for hitting its elusive 2 per cent 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 US and European peers start restocking their tool-kit.
Japan’s economy shrank an annualised 0.6 per cent in the first quarter, though many analysts expect growth to bounce back on solid exports and capital expenditure.
Before the latest contraction, the economy benefited from a global exports boom that continues to underpin a synchronized uptick in world growth.
Core consumer prices rose 0.7 per cent in April from a year earlier, slowing for the second straight month, casting doubt on the BOJ’s view a solid recovery will prompt firms to raise wages and help accelerate inflation to its 2 per cent target.
Given recent weak inflation, the BOJ’s nine board members may look more closely into structural factors that may be holding back price growth, according to sources familiar with the BOJ’s thinking.
While the findings likely won’t be revealed until a subsequent meeting in July, Kuroda may offer some hints at his briefing, analysts say.
Markets are also on the look-out for what Kuroda could say on escalating trade frictions and US President Donald Trump’s threat to impose tariffs on auto imports ― both risks to the export-reliant economy.
The International Monetary Fund warned yesterday that Trump’s new import tariffs threaten to undermine the global trading system, prompt retaliation by other countries and damage the US economy. ― Reuters
Source: The Malay Mail Online