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Investing.com — The Bank of Japan announced on Tuesday that it would keep interest rates in negative territory as widely expected and continue yield curve control measures to support Japan’s economic growth.
The Bank of Japan announced that it would keep the rate unchanged at -0.1% and continue with asset purchases and monetary stimulus.
The bank said it would continue to allow fluctuations in the range of -1-1% under its YCC policy. The company softened its wording on the range at its October meeting, saying it would provide further yield flexibility, including the possibility of exceeding the 1% cap.
The Bank of Japan has changed its YCC policy three times in the past year, citing increased risks to Japan’s economy from high inflation and slow wage growth. However, it largely maintained its ultra-dovish stance, citing the need for further economic support in the face of growing headwinds.
The Bank of Japan has given few clues about its plans to tighten monetary policy in 2024. Traders were disappointed by the lack of clues heading into 2024, and the stock fell 0.5% after the rate decision.
The yield on 10-year bonds rose 1.3 percentage points to 0.679% after the decision, but remains well below the upper limit.
Governor Kazuo Ueda has recently given some hints about the possibility of a policy change in 2024, but the market remains confident that such a move is unlikely given that Ueda has said it is unlikely to materialize in the short term. The timing of this move remains unclear.
The Bank of Japan reiterated this position on Tuesday, saying the Japanese economy is likely to continue facing headwinds from declining export demand and persistent inflation.
In a statement, the Bank of Japan said, “Amidst the extremely high level of uncertainty surrounding the domestic and overseas economies and financial markets, the Bank of Japan will patiently continue monetary easing while responding nimbly to economic, price and financial trends.” said.
The Bank of Japan said it expects inflation to remain above its annual target of 2% in fiscal 2024, although price growth is expected to slow. Underlying CPI inflation is also expected to gradually move towards the 2% target.
All eyes are now on the meeting with Governor Ueda scheduled for 16:00 Japan time (08:30 GMT) in order to obtain further clues regarding monetary policy. Japan’s CPI inflation rate is also expected to be announced later this week.