Central Banks

The Bank of Japan holds monetary policy steady

Key Points
  • The Bank of Japan concluded its two-day monetary policy meeting on Tuesday
  • The central bank said it would keep interest rates steady
Pedestrians cross a road in front of the Bank of Japan headquarters in Tokyo, Japan, on Tuesday, Oct. 31, 2017.
Kiyoshi Ota | Bloomberg | Getty Images

The Bank of Japan announced Tuesday it was keeping its monetary policy steady, a move that was in line with market expectations.

In a statement released following the conclusion of its two-day meeting, the BOJ said it would keep the short-term policy rate unchanged at negative 0.1 percent and the 10-year yield target around 0 percent.

The decision to keep policy unchanged was made following an 8-1 majority vote.

In its quarterly outlook, which was also released on Tuesday, the BOJ noted it would continue with "quantitative and qualitative monetary easing with yield curve control" for "as long as it is necessary" to achieve its 2 percent inflation target.

The central bank said it expected core consumer prices — which exclude food prices — to rise 1.4 percent in fiscal year 2018 and 1.8 percent in 2019, matching its previous forecast, Reuters said, adding that statement was a bit more positive on inflation than previously.

The BOJ expects inflation to reach 2 percent by fiscal 2019.

In a post-meeting briefing, BOJ Governor Haruhiko Kuroda said the economy was not in a situation for the central bank to consider exiting its ultra-easy policy, Reuters reported.

"Japan's economy is expanding moderately, but inflation remains weak. Other countries are facing similar situations but unlike these countries, many of whom are seeing inflation move around 1.5 percent, inflation excluding energy costs is barely above 0 percent in Japan," the news agency cited the BOJ governor as saying.

The BoJ will be the last of the big central banks to change policy

The BOJ earlier this month announced it was slightly reducing its purchases of long-dated Japanese government bonds, which led to speculation that the institution would be the latest to follow in the footsteps of global central banks in tightening policy.

But with inflation still "well below" a 2 percent target, normalization remained a premature suggestion for the BOJ, Kohei Iwahara, an economist at Natixis Japan Securities, wrote in a note ahead of the central bank's Tuesday announcement.

"Any hint to normalize could strengthen the yen further, increasing challenges of the BOJ to meet the inflation target," Iwahara added.

Japan's core consumer price index increased 0.9 percent on year in November, the 11th consecutive month a rise was recorded.

The metric is forecast to grow by the same level in December, according to a Reuters poll. December data is scheduled to be released on Friday.

When both food and energy prices are excluded, however, consumer prices rose just 0.3 percent in November.

Given those figures, "it's very hard to believe [the] BOJ will send any signal that they will change the policy anytime soon," Kazuo Momma, executive economist at Mizuho Research Institute told CNBC's "The Rundown."