BOJ Maintains Ultra-Loose Monetary Policy

The Bank of Japan (BOJ) has decided unanimously to retain its ultra-loose monetary policy, keeping interest rates at -0.1% and adhering to its yield curve control policy. According to the BOJ, prospects for Japan’s economy achieving the 2% inflation target are “gradually heightening.” The central bank stated that the economy is moving in line with its inflation projections, with the core-core inflation forecast at 1.9%, close to the 2% target.

BOJ Governor Kazuo Ueda mentioned that the central bank is more convinced than before about the likelihood of sustainably achieving the price target, but quantifying how close they are remains challenging. The BOJ lowered its median growth forecast for core consumer prices for fiscal 2024 to 2.4%, attributing it to declines in oil prices. However, the central bank slightly increased the core CPI inflation estimate for fiscal 2025 to 1.8%. The focus ahead will be on wage hikes and whether they will spread to prices, particularly service prices, according to Ueda.

The yen strengthened against the dollar following the BOJ announcement, and the Nikkei 225 closed slightly lower. The central bank’s decision reflects its ongoing commitment to supporting economic recovery and achieving its inflation target, with a key focus on wage growth and domestic demand.