BOJ holds steady on interest rate, stimulus

Edward Loggie Specialist Edward Loggie works at his post as a television screen on the floor of the New York Stock Exchange shows the decision of the Federal Reserve, Wednesday, March 15, 2017. The Fed's key short-term rate is rising by a quarter-point to a still-low range of 0.75 percent to 1 percent. (AP Photo/Richard Drew)

TOKYO —

Japan’s central bank opted Thursday to retain its ultra-lax monetary stimulus, citing U.S. policy changes as one of the risks for the global economic outlook.

The Bank of Japan gave no indication it was leaning toward cutting back on the massive purchases of government bonds it is using to support the world’s No. 3 economy by injecting hundreds of billions of dollars into the economy every year.

The BOJ said, as usual, that Japan’s economy was on a “moderate recovery trend.” But it lacks the dynamism seen in the U.S. economy that led the Federal Reserve to raise the federal funds rate Wednesday by 0.25 percentage points to a range of 0.75 to 1 percent.

As expected, the BOJ kept its benchmark policy rate at minus 0.1 percent.

Among risks, it pointed to the potential impact of U.S. monetary policy on global financial markets.

Under Gov. Haruhiko Kuroda, the BOJ has sought to spur price increases to stimulate more spending and borrowing by businesses and consumers. But inflation is stuck at about 0 percent, far below the target of 2 percent set four years ago. Companies are resisting government calls to raise wages enough to entice thrifty consumers into spending more, and Kuroda has given no hint he might seek to tighten credit anytime soon.

“Even if price pressures do strengthen more rapidly than we anticipate, the Bank will want to make sure that it can see the whites of inflation’s eyes before it decides to withdraw stimulus,” Marcel Thieliant of Capital Economics said in a commentary.

The 19-nation eurozone has likewise been tentative about “tapering,” let alone tightening policy. In December, the European Central Bank decided to continue bond purchases through the end of 2017 while reducing them from 80 billion euros ($84 billion) a month to 60 billion euros a month beginning in April.

Last week, the ECB decided not to change the size or duration of its stimulus programs, judging a rise in annual inflation to near its own 2 percent target to reflect increased oil prices rather than other more expansionary factors, such as higher wages for workers.

The Fed’s rate hike did prompt China’s central bank to raise short term rates Thursday, though the People’s Bank of China kept its benchmark one-year commercial lending rate unchanged.

Hong Kong’s central bank copied the Fed by raising its benchmark lending rate by one-quarter point to 1.25 percent. The Asian finance hub’s currency is pegged to the dollar, so authorities are obliged to copy U.S. monetary policy.

Copyright 2017 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

1 Comment

  • 0

    fxgai

    For how long is it appropriate to refer to measures that have failed to stimulate as 'stimulus'.

    Fortunately, we have no inflation. But also no growth either.

Login to leave a comment

OR
Continuing Education: Seminars and Workshops in April

Continuing Education: Seminars and Workshops in April

Temple University, Japan CampusContinuing Education / MBA

Undergraduate: Information session (April 9)

Undergraduate: Information session (April 9)

Temple University, Japan CampusContinuing Education / MBA

Special Offers

Work
in Japan

Search the Largest English Job Board in Japan.

Find a Job Now!

More in Business

View all

View all

Time
to Buy
in Japan

Find the perfect home today!

Search