Japan's central bank retains key interest rate while fine-tuning bond purchases for more flexibility

economictimes.indiatimes.com:

Japan's central bank opted Friday to keep its benchmark interest rate at minus 0.1% but said it will fine-tune its bond purchases to allow greater flexibility given «high uncertainties» for the economy and for prices. The Bank of Japan said it needed a more nimble approach to keep financial markets stable as it works toward a goal of keeping inflation near 2%. It said it would offer to buy 10-year Japanese government bonds at 1% each business day, instead of the upper limit of 0.5% that was imposed under its «yield curve control program.» After the BOJ's announcement, the yield on the 10-year government bond surged to 0.57%.

The aim of the ultra-lax monetary policy is still to keep long-term interest rates near zero percent, it said in a statement. The BOJ's yield curve controls are part of a suite of central bank policies, including massive asset purchases, meant to keep credit cheap to try to spur investment and spending and prop up economic growth. The central bank has faced pressure to adjust its policies as the Federal Reserve and other major central banks raised interest rates to slow lending and curb inflation.

Japan's inflation rate has lagged behind those in the U.S. and Europe but is now over 3%. The BOJ has resisted raising its minus 0.1% benchmark rate out of concern that growth in Japan, the world's third-largest economy, may slow given risks of recession in the U.S.

and other major economies. A slump in China has added to those uncertainties. Friday's decision followed a flurry of speculation over potential changes to policies the bank has kept in place for years.