TOKYO — The Bank of Japan on Wednesday confirmed it would stick to an ultra-easy monetary policy, while other major central banks are moving toward scaling back their asset purchases.
The Japanese central bank maintained its target for short-term interest rates at minus 0.1% and its target for the 10-year Japanese government bond yield at around zero. It also reiterated that it would purchase JGBs without an upper limit.
The decision comes as Japan’s services sector continues to struggle due to the government repeatedly extending a state of emergency due to Covid-19 that calls on restaurants and bars to close early and not serve alcohol. Consumer prices have been falling for nearly a year, in contrast to the U.S., where consumer inflation rose more than 5% in August from a year earlier.
The BOJ’s decision puts it on a diverging path compared with other major central banks.
Federal Reserve officials are expected to signal that they will scale back the central bank’s $120 billion in monthly purchases of Treasurys and mortgage-backed securities this year, according to recent interviews and public statements. The Fed is due to meet later in the day.
The European Central Bank also said earlier this month that it will slightly scale back its massive bond-buying program to reflect the eurozone economy’s brighter prospects, although President Christine Lagarde said that didn’t constitute a plan to reverse easy-money policies.
The BOJ said Wednesday the Japanese economy has picked up, and maintained its economic assessment.
“As the U.S. Federal Reserve and central banks around the world look to dial back their crisis-mode monetary expansion, the Bank of Japan appears stuck in a holding pattern, with no prospect of tightening and little likelihood of easing,” said Stefan Angrick, a senior economist at Moody’s Analytics.
He expects the BOJ to keep its current rate targets for the foreseeable future.
“The key reason is that, fundamentally, there is little prospect for inflation to rise sufficiently to allow the BOJ to hike rates,” Angrick said.
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September 22, 2021 at 09:53AM
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Bank of Japan sticks to ultra-easy monetary policy path - MarketWatch
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