The Bank of Japan maintained its ultra-loose monetary policy as widely expected and kept its forward guidance unchanged on Thursday, after the Federal Reserve signaled rate cuts amid rising risks to economic growth.
The Policy Board of the BoJ voted 7-2 to maintain interest rate at -0.1 percent on current accounts that financial institutions maintain at the bank.
The bank said it will purchase government bonds so that the yield of 10-year JGBs will remain at around zero percent.
Further, the bank will purchase JGBs in a flexible manner so that their outstanding amount will increase at an annual pace of about JPY 80 trillion.
The bank intends to maintain the current extremely low interest rates for an extended period, at least through around spring 2020.
The bank said it will continue expanding the monetary base until annual inflation exceeds 2 percent and stays above the target in a stable manner.
The Bank of Japan is showing no sign of shifting to a more dovish stance, despite the impending sales tax hike and the more dovish tone from the US Fed, Mark Williams, an economist at Capital Economics, said.
The economist expects the bank to keep policy settings unchanged for the foreseeable future.
Inflation is forecast to rise gradually toward 2 percent, mainly on the back of positive output gap and rising inflation expectations.
The central bank cited the U.S. macroeconomic policies and their impact on global financial markets, consequences of protectionist moves, developments in emerging and commodity-exporting economies such as China, developments in global adjustments in IT-related goods and Brexit are major risks to the outlook.
Downside risks concerning overseas economies are likely to be significant and it is necessary to closely watch their impact on corporate and household sentiment, the bank noted.
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