Bank of Japan keeps interest rates unchanged, gives dovish guidance on future policy

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monetary stimulus, according to Reuters news report. The BOJ maintained a 0.1% interest rate and a target yield on 10-year government bonds of roughly 0% during the two-day meeting that ended on Friday, said Reuters in its news report.

Additionally, it kept the hard cap of 1.0% put in July and the reference band that allows the 10-year bond yield to move 50 basis points up and down daily around the 0% objective intact. The BOJ reiterated its commitment in a statement announcing the decision to maintain ultra-loose monetary policy "as long as necessary to maintain the (2% inflation) target in a stable manner." Japan's Nikkei share index reversed early losses after the Bank of Japan indicated on Friday that it was not in a rush to tighten policy while maintaining support.

Prior to this, the benchmark index had fallen nearly four-week low, following Wall Street's severe declines that were sparked by concerns of a more hawkish Federal Reserve. Following a hint from BOJ Governor Kazuo Ueda in a newspaper interview earlier this month that the end of negative interest rates would occur as soon as this year, according to a Reuters, Friday's decision was widely awaited.

Data released earlier on Friday showed that core inflation has continued to rise for a 17th consecutive month, fuelling concerns that price pressures will force the BOJ to adopt a more hawkish stance, according to Reuters report. As the Fed and the majority of its major peers follow the approach of raising rates for a longer period of time to combat stubborn inflation, the BOJ has been a worldwide outlier in maintaining ultra-easy stimulus.