Bank of Japan keeps policy steady, cuts inflation forecast

  • The Bank of Japan kept monetary policy steady on Wednesday and cut its price forecasts, reinforcing market expectations that subdued inflation will force it to maintain its massive stimulus program for the time being.
  • The central bank also issued a stronger warning than three months ago on the costs of prolonged easing, saying that the risk of the financial system destabilizing is not big for now but warrants attention.

Cars go past the headquarters of the Bank of Japan in Tokyo on March 6, 2008.
TORU YAMANAKA | AFP | Getty Images
Cars go past the headquarters of the Bank of Japan in Tokyo on March 6, 2008.

The Bank of Japan (BOJ) kept monetary policy steady on Wednesday and cut its price forecasts, reinforcing market expectations that subdued inflation will force it to maintain its massive stimulus program for the time being.

The central bank also issued a stronger warning than three months ago on the costs of prolonged easing, saying that the risk of the financial system destabilizing is not big for now but warrants attention.

In a widely expected move, the BOJ maintained its short-term interest rate target at minus 0.1 percent and a pledge to guide 10-year government bond yields around zero percent.

The central bank also left unchanged its forward guidance, adopted in July, that pledges to keep interest rates extremely low for an extended period.

The decision on maintaining its interest rate targets was made by a 7-2 vote with board members Goushi Kataoka and Yutaka Harada dissenting.

BOJ Governor Haruhiko Kuroda will hold a news conference at 3:30 p.m. (0630 GMT) to explain the policy decision.