BOJ keeps ultra-low rates, dovish stance unchanged; trims inflation outlook
Investing.com-- The Bank of Japan kept interest rates at historical lows on Tuesday and left its yield curve control policies unchanged, but slightly lowered its inflation outlook for fiscal 2024.
The BOJ left its short-term interest rates at negative 0.1%, and said it will maintain its yield curve control mechanism in allowing 10-year yields to fluctuate in a range of negative 1% to 1%, with a target of 0%.
The central bank also offered no changes to its asset purchase programs.
The BOJ said in an announcement on Tuesday that it expects consumer price index (CPI) inflation to keep trending above its 2% annual target through fiscal 2024, and that inflation will only begin easing by fiscal 2025.
But a majority of the BOJ's policy board members lowered their CPI inflation forecasts for fiscal 2024. Median forecasts for core CPI inflation- which excludes fresh food prices- were now at 2.4% in 2024, down from the bank's October forecast of 2.8%.
Core CPI in fiscal 2025 is expected between 1.6% and 1.9%, down slightly from prior forecasts of 1.6% to 2%, although the median forecast rose slightly to 1.8% from 1.7%. BOJ policymakers also forecast underlying CPI inflation in a tighter range for 2025.
The softer near-term outlook for inflation comes amid a sustained decline in Japanese inflation in recent months. But the BOJ said that this decline will be limited, as service costs remain high and past increases in import prices are baked into the economy.
Focus now turns to an upcoming press conference with Governor Kazuo Ueda later in the day, for more cues on the BOJ's plans to tighten policy.
Ueda had recently said he saw no immediate need to change the BOJ’s dovish stance, amid signs of easing inflation and languid wage
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