Bank of Japan scales back emergency funding as pandemic strains ease

The Bank of Japan kept monetary policy ultra-loose on Friday but dialed back emergency pandemic-funding, less than 48 hours after the U.S. Federal Reserve signaled an imminent end to stimulus as policymakers respond to soaring global inflation.
 

The BOJ's decision, underpinned by cautious optimism that the economic damage wrought by coronavirus crisis is gradually healing, puts it in line with major central banks' moves to phase out crisis-mode policies.
 

In a widely expected move, the BOJ on Friday maintained its short-term rate target at -0.1% and that for 10-year bond yields around 0%.
 

But it decided to scale back a portion of pandemic-relief funding when it expires in March 2022, such as by slowing purchases of corporate bonds and commercial paper to pre-pandemic levels.
 

"Financial conditions in Japan have improved on the whole, despite the continued significant impact of the COVID-19 pandemic on domestic and overseas economies," the BOJ said in a statement announcing the decision.
 

Britain became the first G7 economy to hike interest rates since the onset of the pandemic on Thursday. The European Central Bank also took another small step in rolling back crisis-era stimulus, though it pledged to keep borrowing costs low next year.
 

And mid-week, the Federal Reserve said it would end its pandemic-era bond purchases in March and pave the way for three quarter-percentage-point interest rate hikes by the end of 2022 as policymakers cope with a surge of inflation.