Bank of Japan has kept monetary policy unchanged

The Bank of Japan kept its policy rate unchanged after its monetary policy meeting on Friday, keeping its benchmark policy rate at 0%-0.1%.

This is in line with the expectations of economists surveyed by Reuters.

While the move was expected, it came after Tokyo’s April inflation came in below expectations, with the core inflation rate coming in at 1.6%, compared with Reuters’ expectation of 2.2%.

The BOJ also said it would continue bond purchases in line with its March decision. The bank earlier in March said it bought about six trillion yen ($83.5 billion) worth of bonds per month.

There was no comment from BOJ on this yenWhich has continued to weaken since the BOJ ended its negative interest rate policy and its yield curve control policy last month.

The currency breached the 156 level against the US dollar on Friday following the decision, having recently traded at 156.11.

Separately, the central bank also released its second-quarter outlook for Japan’s economy, raising its outlook for inflation into fiscal 2024.

The BOJ now expects inflation to be between 2.5% to 3% for fiscal 2024, up from its January forecast of 2.2% to 2.5%.

The bank said inflation is projected to decline to “about 2%” in fiscal years 2025 and 2026.

The BOJ also cut its GDP growth forecast for fiscal 2024 to between 0.7% and 1%, down from a January forecast of 1%-1.2% growth.

In light of the Outlook report, the BOJ said that going forward, the conduct of its monetary policy will depend on future developments in economic and price conditions. But it said favorable financial conditions would be maintained “for the time being”.

The BOJ recognizes that uncertainties remain high regarding these economic and financial developments at home and abroad. But if its forecasts materialize and underlying inflation rises, the central bank said it would “adjust the degree of monetary accommodation.”

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