TOKYO: The Bank of Japan dug its heels in on its easy-money policies Thursday while raising its inflation forecast, even as other countries hike interest rates to tackle soaring prices, reports BSS.
Policymakers have refused to move away measures put in place a decade ago as the BoJ battles to achieve sustained price rises in the world’s third-largest economy.
But the decision leaves it increasingly alone as its peers raise rates, sending the yen tumbling to a 24-year low against the dollar.
Highlighting the different approaches, the European Central Bank is later Thursday expected to announce its first rate increase since 2011.
Prices are rising in Japan, and the BoJ raised its inflation forecast for fiscal 2022-23 to 2.3 percent, up from 1.9 percent in April, “due to rises in prices of such items as energy, food, and durable goods”.
“Thereafter, the rate of increase is expected to decelerate” as energy prices stabilise, it said.
The BoJ added that it would hold rates at minus 0.1 percent and continue buying unlimited government bonds to maintain a low cap on long-term yields.
These monetary easing policies are intended to achieve sustained two-percent inflation, a target the bank considers key for stable growth.
The central bank views current price increases, driven by pandemic supply snarls and higher commodity prices linked to the war in Ukraine, as temporary.
So while its counterparts elsewhere are moving to tame inflation, it sees no need to change tack.
“There is no sign of meaningful accelerations in the rate of increase in wages, which is necessary for a sustainable rise of prices,” said Ryutaro Kono, chief economist at BNP Paribas.
And some feel rate hikes would not address current inflationary pressure in Japan.