Bank of Japan Sticks With Holding Pattern

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TOKYO—The Bank of Japan left its aggressive easing policy unchanged Friday and offered no new clues on when and how it might join other major central banks in winding down its measures as

Haruhiko Kuroda

heads toward a second five-year term as governor.

The Japanese central bank voted 8-1 to maintain its target for 10-year Japanese government bond yields at around zero and its short-term deposit rate at minus 0.1%, extending its holding pattern on its current policy settings to a year and a half.

The bank also stuck with its pledge to buy government bonds at an annual rate of 80 trillion yen ($750 billion), a passage seen by investors as a symbolic gauge of its commitment to easing. The actual pace of purchases has fallen below ¥55 trillion in the most recent 12-month period.

The decision to keep policy on hold comes amid recent focus among economists and investors on when the central bank will scale back its easing measures.

Mr. Kuroda, set for a second-term starting in April, recently said for the first time that the bank would consider exiting its current policy in the year starting in April 2019 when inflation is expected to reach its goal of 2%.

Speculation over a possible rate increase in Japan has contributed to a strengthening of the yen since the beginning of the year amid a global move away from extraordinary stimulus measures led by the Federal Reserve, an improvement in Japan’s economy and a gradual uptick in inflation.

Mr. Kuroda’s comment last week sent the yen and 10-year JGB yields sharply higher, illustrating markets’ sensitivity to any exit talk. A few days later, the BOJ chief toned down his language, saying his remark didn’t necessarily mean the bank would start departing from its current policy in that year.

At its meeting, the bank maintained its assessment of the economy, saying it was “expanding moderately,” a day after Japan confirmed its longest stretch of growth since the late 1980s. Revised government data released Thursday showed that Japan’s economy grew 1.6% in the last quarter of 2017, faster than initially estimated, as consumers spent more and firms ramped up capital investment.

Still, the extended growth streak has yet to translate into inflation of 2%. One member of the BOJ board continued to argue that the central bank wasn’t doing enough to reach its inflation target.

Goushi Kataoka

again voted against the decision to keep policy on hold, reiterating his view that the bank won’t reach the goal by March 2020 without taking more action. He recommended the bank lowered the 10-year yield target rate and other longer-term rates.

The most recent inflation data show that core consumer prices rose 0.9% on year in January.

Investors are likely to closely scrutinize Mr. Kuroda’s news conference remarks later in the day for any new clues over the bank’s possible exit from its ultra-easy monetary policy.

Write to Megumi Fujikawa at [email protected]



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