Bank of Japan maintains rates
TOKYO — The Bank of Japan (BoJ) maintained ultra-easy monetary settings on Tuesday in a widely expected move, as policy makers allow more time to determine whether wage increases will broaden enough to keep inflation sustainably at its 2% target.
However, underlining its growing conviction that conditions for phasing out its massive stimulus was falling into place, the central bank said the likelihood of the economy achieving durable 2% inflation continued to “gradually rise.”
Traders are focusing on any clues by governor Kazuo Ueda on how soon the BoJ will pull short-term rates out of negative territory, which is seen as the next move Mr. Ueda will take in dismantling his predecessor’s radical stimulus program.
Many market players expect the BoJ to end negative rates sometime this year with a recent Reuters poll showing April as the most likely timing for this to occur.
“The BoJ decided to stand pat probably because it wanted more evidence a virtuous cycle of wage growth and prices will take hold,” said Izuru Kato, chief economist at Totan Research,
adding that he expects the bank to end negative rates in April.
At the two-day meeting that concluded on Tuesday, the BoJ left unchanged its short-term rate target at -0.1% and that for the 10-year bond yield around 0%. The central bank has maintained negative interest rates since 2016.
The yen fell broadly after the announcement, last trading at 148.39 per dollar.
In a quarterly report on the outlook, the BoJ cut its core consumer inflation forecast for the fiscal year beginning in April to 2.4% from 2.8% projected in October. It slightly revised up its forecast for fiscal 2025 to 1.8% from 1.7%.
The board left unchanged its forecast that an index gauging trend inflation will hit 1.9% in 2024 and 2025, underscoring policy makers’ view the economy is on track for sustainably meeting 2% inflation. “Consumer inflation is likely to increase gradually toward the BoJ’s target as the output gap turns positive, and as medium- to long-term inflation expectations and wage growth heighten,” the BoJ said in the outlook report. —