Bank of Japan keeps ultra-loose policy, downgrades economic growth foreacst

2022-07-21 17:59:48Xinhua Editor : Hao Yunhui ECNS App Download

The Bank of Japan (BOJ) decided on Thursday to maintain its ultra-easy monetary policy despite rising inflation and the yen's recent weakness, while downgrading the Asian country's economic growth forecast.

At the conclusion of a two-day policy meeting, the BOJ decided to continue with a short-term interest rate of minus 0.1 percent and a 0.25 percent cap on 10-year Japanese government bond yields.

The BOJ has remained steadfast to maintaining its ultra-loose monetary policy and suggested that recent inflationary pressure that has prompted other countries' central banks to hike their rates is temporary.

Economists, however, have said the BOJ's policy doesn't reflect the resource-poor country's economic fundamentals including the fact that wages have remained stagnant despite soaring costs for energy imports and raw materials which will impact consumption.

In stark contrast to the BOJ, the U.S. Federal Reserve has been aggressively hiking its rates to combat inflation, with another rate hike on the cards for next week, while the European Central Bank is likely to increase its rates on Thursday for the first time in 11 years, as the interest rate gap continues to widen between BOJ and other major central banks.

The BOJ upgraded its core consumer inflation forecast to 2.3 percent in fiscal 2022, up from its earlier forecast of 1.9 percent, according to its quarterly outlook report released after the bank's policy meeting. The central bank's long-elusive inflation target had been 2 percent.

The central bank said the upgrade was due to higher energy and raw materials costs, in twine with the yen's weakness that pushes up or inflates import prices.

However, the BOJ said Japan's economy is projected to expand 2.4 percent in real gross domestic product for fiscal 2022, dropping from the 2.9 percent forecast in April. 

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