Japan’s central bank decided Friday to maintain its key interest rate at minus 0.1%, defying aggressive hikes by peers in the US and Switzerland, citing some economic weakness stemming from the pandemic and high commodity prices.
To keep the 10-year yields at around zero, the Bank of Japan (BoJ) “will purchase a necessary amount of Japanese government bonds (JGBs) without setting an upper limit”, it said.
Recovery for the world’s third biggest economy is underpinned by waning COVID-19 impact and supply-side constraints, improving external demand, accommodative financial conditions and the government’s economic measures, the central bank said.
A high inflation rate at around 2% is being caused by rising energy and food prices, which may stay for some time “but should decelerate thereafter”, it said.
The central bank’s continued accommodative monetary policy stance, in stark contrast with the US Federal Reserve’s tightening, has been exerting downward pressure on the yen.
The currency tumbled to a 24-year low on 14 June at above yen (Y) 135 to the US dollar, before rebounding to a two-week high of around Y132. At around noon on Friday, the yen was trading at Y134.10.
