BoJ Stands Pat On Monetary Policy

The Bank of Japan left its ultra-loose monetary policy unchanged on Thursday, asserting its pledge to keep interest rate extremely low for an extended period of time amid indications of global economic slowdown.

The policy board of the BoJ voted 7-2 to purchase government bonds so that the yield of 10-year JGBs will remain at around zero percent.

The board maintained interest rate at -0.1 percent on current accounts that financial institutions maintain at the bank.

The BoJ will conduct purchases of Japanese government bonds in a flexible manner so that the outstanding amount will increase at an annual pace of about JPY 80 trillion.

The bank pledged to maintain the current extremely low interest rates for an extended period of time, in the light of uncertain economic outlook and prices, including the impact of the consumption tax hike scheduled for October next year.

The BoJ said it will continue with "Quantitative and Qualitative Monetary Easing with Yield Curve Control" policy unchanged to attain the inflation goal of 2 percent and maintain that target in a stable manner.

The bank reiterated that it will continue expanding the monetary base until the year-on-year rate of increase in the observed CPI exceeded 2 percent and stayed above the target in a stable manner.

The bank retained its assessment on the Japanese economy, noting that it was "expanding moderately".

Regarding economic outlook, the bank observed that the Japanese economy is expected to continue its moderate expansion, underpinned by solid domestic demand and export growth.

The Bank of Japan is likely to leave policy rates unchanged until the end of 2020 to ensure that the economy can cope with a major tax increase scheduled for October next year, Marcel Thieliant, an economist at Capital Economics, said.

The analyst believed that the labor market will tighten a little further over the coming year, but inflation is seen staying well below the bank's 2 percent inflation target for the foreseeable future.

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