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Japan central bank keeps policy steady, Kuroda likely to flag distant stimulus exit

Reuters  |  TOKYO 

By and Stanley White

TOKYO (Reuters) - Japan's central kept monetary settings unchanged on Friday and stuck to its upbeat view on the economy, underscoring its conviction that its massive stimulus programme is helping drive inflation toward its elusive target.

With fears of a global trade war and a strong yen clouding the outlook, however, of is likely to use his post-meeting briefing to reassure markets the central is in no rush to dial back ultra-easy policy.

"Japan's economy is expanding moderately, with a virtuous cycle from income to spending operating," the BOJ said in a statement announcing the policy decision.

In a widely expected move, the BOJ maintained its pledge of guiding short-term interest rates at minus 0.1 percent and the 10-year government bond yields around zero percent.

The central bank revised down its assessment on housing investment to say it was on "weak note," compared with the view in January that it was moving sideways.

The decision came in the wake of data showing workers' wages fell at the fastest pace in six months, in a sign that consumption will lose momentum this year and weigh on an economy now enjoying its longest run of growth in 28 years.

A strong yen adds to worries for Japanese policymakers as it could cool an export-reliant economy and discourage firms from raising wages.

"The BOJ is likely to stand pat for the foreseeable future. Given how currency markets are behaving now, it must be hard to debate an exit from easy policy any time soon," said Izuru Kato, at

Kuroda, who is set to serve another term, rattled markets last Friday by flagging for the first time the prospect of a stimulus exit if 2 percent inflation were met in fiscal 2019 - a remark he later tempered.

The BOJ is caught in a bind. Inflation remains well below its 2 percent target even as the economy enjoys its longest growth run in 28 years, keeping it from dialing back stimulus despite the rising costs of prolonged easing.

That leaves Kuroda with a tough task in his second term beginning in April, which is to navigate the long road toward a stimulus exit with subtle hints without stoking market fears of an imminent policy shift.

A majority of economists polled by expect the BOJ to keep its long-term rate target unchanged this year, though 40 percent expect a hike.

The March rate review will be the final one before a BOJ leadership change, in which two new deputy governors will replace the departing officeholders on March 20.

(Additional reporting by and Minami Funakoshi; Editing by Sam Holmes)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Fri, March 09 2018. 13:41 IST