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Bank of Japan is sticking to negative rates while promoting policy consideration

1 May, 2023: The Bank of Japan is leaving its interest rates not planned in the newly appointed Governor Kazuo Ueda’s initial policy meeting.

The decision was in line with economist anticipation for no changes to the benchmark interest prices, which have been held at -0.1% since the central bank took rates less than zero in 2016.

The central bank is keeping the tolerance range for 10-year Japanese administration bonds unchanged at 50 basis points over and below its target of 0%.

In December, the central bank shocked international bond markets by unexpectedly widening its tolerance hit for 10-year Japanese administration bonds from 25 basis points to 50 basis points over and below 0%.

After the announcement, the Japanese yen weakened at present 0.8% to 134.75 against the U.S. dollar. The yield on the 10-year JGB decreased to 0.425%.

While maintaining present policies, the Bank of Japan said it “decided to conduct a broad-perspective lookout” of its easing measures.

The central bank stated that the planned timeframe for the review is nearly one to 1½ years.

“Achieving costs stability has been a challenge for 25 years,” the central bank stated, which added that its monetary easing “have interacted with and include wide areas of Japan’s economic activity, costs, and financial sector.”

In a different outlook, the central bank forecast inflation for every item excluding fresh food and energy, to be nearly 2.5% for fiscal 2023 and 1.5% and 2% for 2024 and 2025.

Ueda has previously emphasized that inflation needs to be “quite strong and close to 2%” before adjusting the yield curve control policy.

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