(Finance) – The Bank of Japan does not follow other central banks, which are rushing to raise interest rates to counter runaway inflation, and confirms its ultra-expansionary monetary policy. As expected, the BOJ maintained its short-term rate target at -0.1% and its 10-year bond yield target of around 0% during the monetary policy meeting that ended Thursday (with a vote of 8-1 by officials). The decision came a few hours before that of the European Central Bank (ECB), which will proceed with a rate hike of 25 or 50 basis points.
For the moment, by closely monitoring the impact of Covid-19, the Central Bank “it will support financing, mainly from businesses, and maintain stability on the financial markets and it will not hesitate to take further easing measures if necessary. ”The institution led by Haruhiko Kuroda also expects short-term and long-term official interest rates to remain at or below current level.
In the outlook accompanying the monetary policy decision, the Bank of Japan states that the year-on-year rate of change of theconsumer price index increases towards end of this year due to rising prices for items such as energy, food and durable goods. Thereafter, the rate of increase is expected to slow down as the positive contribution of rising energy prices to inflation is set to decline.
In conclusion, the Bank of Japan will continue with the Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control, with the aim of achieving the price stability target of 2%, “as long as it is necessary to maintain this target in a stable manner”. It will then continue to expand the monetary base until the observed year-on-year rate of increase in the CPI (all items without fresh food) “exceeds 2% and remains stable above target.”