The Bank of Japan held its monetary policy steady on Friday and predicted that the economy is likely to continue its moderate expansion despite slowing overseas growth hurting exports and production.
The policy board of the BoJ voted 7-2 to purchase government bonds so that the yield of 10-year JGBs will remain at around zero percent.
The board maintained interest rate at -0.1 percent on current accounts that financial institutions maintain at the bank.
The BoJ will conduct purchases of Japanese government bonds in a flexible manner so that the outstanding amount will increase at an annual pace of about JPY 80 trillion.
The decision was widely expected by economists.
The bank pledged to maintain the current extremely low interest rates for an extended period of time, in the light of uncertain economic outlook and prices, including the impact of the consumption tax hike scheduled for October this year.
The BoJ said it will continue with “Quantitative and Qualitative Monetary Easing with Yield Curve Control” policy to attain the inflation goal of 2 percent and maintain that target in a stable manner.
The bank reiterated that it will continue expanding the monetary base until the year-on-year rate of increase in the observed CPI exceeded 2 percent and stayed above the target in a stable manner.
Japan’s economy was expanding moderately, although exports and industrial production have shown some weakness due to the impact of slowing overseas growth.
Concerning the economic outlook, the bank observed that the Japanese economy is expected to continue its moderate expansion, even though the slowdown in overseas economies has taken a toll for the time being.
With the world economy on course for the weakest quarter of growth in two years, there is a possibility for the Japanese economy to contract again in the first quarter, Darren Aw, an economist at Capital Economics, said.
The economist expects that policy rates to be kept near zero at least until the end of 2020.
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