BOJ Keeps Monetary Policy Unchanged

Tokyo, March 19 (Jiji Press)–The Bank of Japan decided to keep its monetary policy unchanged at a two-day Policy Board meeting that ended Thursday. The board voted eight to one to maintain the policy of guiding the unsecured overnight call rate, Japan’s benchmark short-term interbank lending rate, to around 0.75 pct. The policy rate was raised to the level from around 0.5 pct in a decision made last December. Of the nine Policy Board members, Hajime Takata proposed raising the policy rate to around 1.0 pct, but the proposal was voted down by a majority. In a statement issued after the meeting, the central bank said that the Japanese economy has “recovered moderately, although some weakness has been seen in part.” In the face of rising tensions in the Middle East following the U.S. and Israeli attacks on Iran, global financial and capital markets have been volatile and crude oil prices have risen significantly, the BOJ said, adding, “Future developments warrant attention.” The central bank also said that it is necessary to observe closely the impact of rising crude oil prices on the outlook for Japan’s underlying inflation rate. It said risks to the outlook include the future course of the situation in the Middle East as well as developments in crude oil prices. Elsewhere in the statement, the BOJ said that the year-on-year rate of increase in Japan’s core consumer price index, which excludes fresh food prices, is likely to temporarily decelerate to below 2 pct as the effects of rising food prices, including rice prices, wane. The CPI growth rate is then expected to come under upward pressure, affected by the recent rise in crude oil prices, it added. The central bank maintained its view that Japan’s inflation is likely to be at “a level that is generally consistent with the price stability target” of 2 pct in the second half of its forecast period through fiscal 2027. As for the conduct of monetary policy, the BOJ said that if economic and price trends proceed as expected, it will “continue to raise the policy interest rate and adjust the degree of monetary accommodation,” given that real interest rates remain at significantly low levels. END [Copyright The Jiji Press, Ltd.]