Tokyo, Japan – The Bank of Japan (BoJ) announced on Friday that they will be maintaining their policy rate following their monetary policy meeting, keeping the benchmark policy rate steady at 0%-0.1%. This decision aligns with the expectations of economists surveyed by Reuters. Despite the predicted outcome, the maintenance of the rate comes after a lower-than-anticipated April inflation rate in Tokyo, with core inflation coming in at 1.6%, falling short of the 2.2% expectation from Reuters.
Furthermore, the BOJ confirmed that they will continue with bond purchases as outlined in their March decision. In March, the bank had disclosed that they were purchasing approximately six trillion yen ($83.5 billion) worth of bonds per month. Amidst the maintenance of the policy rate, the BOJ refrained from commenting on the fluctuations in the yen, which has been weakening steadily since the BOJ terminated its negative interest rate policy and eradicated its yield curve control policy.
Following the BOJ’s decision, the Japanese currency surpassed the 156 mark against the U.S. dollar, with the latest trading rate recorded at 156.11. Additionally, the central bank released their second-quarter economic outlook for Japan, raising their inflation forecast for fiscal 2024 to a range of 2.5% to 3%, up from the 2.2% to 2.5% estimate provided in January. They anticipate a subsequent deceleration in inflation to approximately 2% in fiscal years 2025 and 2026.
However, despite the optimistic inflation outlook, the BOJ revised down the growth projections for Japan’s gross domestic product (GDP) for fiscal 2024. Their current forecast now predicts a growth range of 0.7% to 1%, a decrease from the 1%-1.2% growth projection made in January. In response to the economic forecasts, the BOJ expressed intentions to maintain accommodative financial conditions moving forward, contingent on economic and price developments.
Acknowledging the prevailing uncertainties in domestic and global economic trends, the central bank emphasized that they will adjust the degree of monetary accommodation if the forecasts materialize and underlying inflation rises. The BOJ’s commitment to adapt their monetary policy according to economic conditions underscores the importance of maintaining stability and flexibility in the face of evolving economic landscapes.