Tokyo, 18 Jan (EFE).- The Bank of Japan said Wednesday it would continue its policy of ultra-low interest rates and defended its stimulus plan despite soaring inflation.
Following a two-day policy meeting, BoJ governor Haruhiko Kuroda told reporters the bank would maintain its yield curve control (YCC) program at -0.1% for short-term interest rates and 10-year bond yields at around 0%.
Kuroda said the bank expected core consumer inflation to slow below 2% toward the latter half of 2023
“When looking at trend inflation, we’ll likely see inflation gradually accelerate toward our price target due to improvements in the output gap, rises in medium- and long-term inflation expectations and higher wages,” the governor added.
The announcement to maintain its yield curve unchanged has surprised markets and sent the yen spiraling down but Kuroda defended the central bank’s policy saying that the measures were implemented very recently and that it would take more time for them “to start having an effect in fixing market function.”
The BoJ has implemented an ultra-easy policy since Kuroda took the reins in 2013, and the governor defended the approach saying the measures had lifted Japan out of a deflationary spiral that had gripped the nation since 1998.
Defending his strategy, Kuroda said that to support Japan’s economy an ultra-loose monetary policy was needed to ensure companies could raise wages.
Kuroda did say he regretted that Japan had not yet achieved its 2% inflation target and said that interest rates would remain at “present or lower levels.”
The consumer price index rose by 3.7% in November, its biggest increase in 41 years, and above the BoJ target for the eighth consecutive month, but the bank has classified it as a transitory trend linked to the rising cost of raw materials and energy.
Kuroda’s tenure at the helm of the BoJ will come to an end in April when the governor will lead his final policy-setting meeting. EFE