Bank of Japan keeps monetary policy unchanged, with deposit rate at -0.1%

The Bank of Japan (BoJ) maintained unchanged, this Wednesday (18), the main references that guide monetary policy in the country. The Japanese central bank left the short-term rate on deposits at -0.1% and the target 10-year local government bond (JGB) yield at around zero.

The monetary authority also reiterated that it intends to keep the interest variation range within the range of -0.50% to +0.50% – the level defined in December.

After the announcement of the decision, the Tokyo Stock Exchange increased the rise to 2.40% and the dollar accelerated gains, to close to 131 yen, in the early hours of this Wednesday (Brasília time).

BoJ President Haruhiko Kuroda said on Wednesday he was not considering further expanding the 10-year JGB range. Kuroda made the comment at a press conference following the BoJ’s decision to leave its monetary policy unchanged.

In December, the BoJ unexpectedly widened the 10-year JGB yield range to -0.50% to 0.50%, sparking speculation that the BOJ was laying the groundwork to start tightening its monetary policy in amidst inflationary pressures.

The previous range was -0.25% to 0.25%. In recent days, the JGB even surpassed the ceiling of 0.50%, leading the BoJ to intensify purchases of government bonds at auctions.

For Kuroda, the recent increases in purchases “are not problematic”. According to him, the market will need more time to adjust to the variation range established about a month ago. Kuroda said he hoped, however, that market functioning would improve again soon.

“In this sense, (the policy) of interest curve control is sufficiently sustainable,” he said. Also at the briefing, Kuroda said that the BoJ has yet to meet its 2% inflation target in a sustainable manner and claimed that the Japanese economy requires firm support from monetary policy.