Bank of Japan Keeps Rates Unchanged but Cuts Economic Forecasts
The Bank of Japan left its monetary policy unchanged and kept short-term interest rates at the level of -0.1%. The target yield of a 10-year JGB Treasury bond remained at around 0%. The Bank of Japan also kept its commitment to acquire Japanese government bonds worth 80 trillion yen per year.
Japan’s central bank also lowered its economic forecasts amid global trade tensions. In the updated economic projects of the Bank of Japan, fiscal 2018 growth forecast was downgraded from 1.5% to 1.4%. Growth forecasts for 2018 and 2019 were kept unchanged at 0.8%.
Fiscal 2018 core CPI projection was lowered notably to 0.9%, down from 1.1%. For fiscal 2019 and 2020, ex-sales-tax-hike core CPI projections were also lowered, to 1.4% and 1.5%, down from 1.5% and 1.6% respectively.
Inflation in Japan remains well below the Bank of Japan target of 2%, despite Japan’s steady economic expansion, forcing the central bank to maintain incentives, despite the impact on banks' profits over the years at almost zero interest rates. Many analysts warn that intensifying trade frictions and slowing Chinese demand could weigh on business sentiment and discourage firms from boosting spending.