Thursday, September 21, 2023
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BOJ maintains ultra-low interest rates, ignoring global tightening trend

Leika Kihara

TOKYO (Reuters) – The Bank of Japan kept interest rates ultra-low and maintained its dovish guidance on Friday, cementing its unusual position in global central bank tightening Monetary policy as recession fears dampen prospects for a solid recovery.

But the central bank raised its price forecast by 2024 and warned that risks are skewed to the upside, echoing recent signs that inflationary pressures are building.

“The labor market will continue to tighten and wage pressure will gradually build,” the Bank of Japan said in its quarterly report.

“Accelerating underlying inflation is expected to raise mid- to long-term inflation expectations … and lead to sustained wage increases,” it said.

As widely expected, the Bank of Japan kept its short-term interest rate target of -0.1% unchanged and committed to 10 year bonds The yield is guided around 0%.

The central bank also maintained its dovish guidance, expecting short- and long-term interest rates to remain at “current or lower levels.”

Yen fell about 0.4% to session lows 146.90 At the central bank’s Against the dollar after the decision, but later reversed losses to make marginal gains. Finally at 146 higher by 0.13%. 10

Japan benchmark after BoJ decision to stay unchanged Annual bond yields fell to their lowest level in nearly four weeks

“The Bank of Japan will continue to lag the U.S. and Europe in tightening monetary policy,” said Kyohei Morita, chief economist at Nomura Securities.

In fact, given the pace and extent of inflation below that of Western economies, it will not raise rates until at least the fiscal year beginning in April 2024 . “

In new forecasts, the Bank of Japan raised its forecast for core consumer inflation through March 2023 to 2.9% from 2.3% in July, and exceeded its 2 percent target.

It also raised its fiscal 2023 and 2024 inflation forecasts to 1.6 percent, compared to the most recent The signs are in favor of companies actively passing on rising raw material costs to household lds.

However, the Bank of Japan cut fiscal 2022 and 2023.

The European Central Bank decided on Thursday to raise interest rates again, continuing its efforts to prevent rapid price growth from becoming entrenched. The Federal Reserve is also expected to raise interest rates next week.

While more dovish than other major economies, Japan’s core consumer inflation hit an eight-year high of 3% in September, surpassing the Bank of Japan’s 2% target for the sixth month in a row .

The Bank of Japan’s ultra-loose policy caused the yen to depreciate sharply, pushing up the cost of importing already expensive fuel and raw materials, prompting the government to intervene in the market to support the currency.



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