The Bank of Japan maintained its huge economic stimulus program and warned of increased risks in a fragile economic recovery due to the crisis in Ukraine, reinforcing expectations that it will not follow the global shift towards a tighter monetary policy.
The BoJ’s stance is in stark contrast to that of the US Federal Reserve and the Bank of England, which raised interest rates this week to stem inflation.
As expected, the Bank of Japan kept the short-term interest rate target at -0.1% and the 10-year bond yield at around 0% in the two-day policy meeting that ended on Friday.
“The Japanese economy is recovering as a trend,” the BoJ said in a statement, which was less optimistic than at the previous meeting in January, when the economy was showing “clear signs of recovery.”
The central bank also warned of new risks from the crisis in Ukraine, which “destabilizes financial markets and sharply increases the cost of raw materials.”
“There is great uncertainty about the impact that developments in Ukraine could have on the Japanese economy and prices through markets, commodity prices and foreign economies,” the statement said.
“With inflation and wage growth lagging behind other countries, the BoJ has no choice but to patiently maintain its support program, at least until the end of Kuroda’s term in April 2023,” analysts said. BNP Paribas Securities.
Source: Capital
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