Bank Of Japan Sticks To Easy Monetary Policy Amid High Uncertainties

In a recent policy meeting, the Bank of Japan (BOJ) decided to uphold its ultra-easy monetary policy. This decision is in response to what the bank refers to as “extremely high uncertainties.”

What Happened: As per a CNBC report, the BOJ on Tuesday unanimously agreed to keep interest rates at -0.1%. The cap for 10-year Japanese government bond yield was also maintained at 1% as a guideline, in line with its yield curve control policy.

Post the decision by the BOJ, the Japanese yen weakened, trading around 143.5 against the dollar during midday trade. The Nikkei 225 stock index noted a 1% increase, while the 10-year Japanese government bonds’ yields remained largely stable.

The BOJ is being careful in unwinding its ultra-loose monetary policy due to a slowing economy and slowing inflation.

The bank stated, “With extremely high uncertainties surrounding economies and financial markets at home and abroad, the Bank will patiently continue with monetary easing.”

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Despite core inflation surpassing its 2% target for 19 consecutive months, the BOJ has continued with its super accommodative monetary policy. The bank is focused on inflation being driven by domestic demand for a more sustainable and stable economy.

BOJ’s Governor Kazuo Ueda is expected to meet the press later on Tuesday, which may provide more insight into the BOJ’s plans.

Why It Matters: The Japanese economy has been thriving despite high interest rates in the U.S. and a slump in Chinese stocks. The country has benefitted from rising consumer prices, a weak yen that has greatly benefited exporters in recent years, and the BOJ’s policy of maintaining negative interest rates.

Japan posted a 4.8% GDP growth in the second quarter of the year, largely due to the BOJ’s market and monetary interventions. The current decision to continue with ultra-easy monetary policy indicates BOJ’s unwavering focus on domestic demand-led inflation for a sustainable and stable economy.

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Photo by Jun Rong Loo on Unsplash