The Bank of Japan maintained its ultra easy monetary policy Tuesday and said it would “not hesitate” to take further measures if needed, as lingering economic uncertainties cloud the global outlook.
The move comes with central banks around the world expected to return to rate cuts in the face of nagging concerns, including the effects of US President Donald Trump’s trade policies, agency reports. The BoJ slightly downgraded its inflation outlook to 1.0 percent for the year to March 2020 and 1.3 percent for the following year, compared with previous forecasts for 1.1 percent and 1.4 percent respectively. The figures again fell far short of the two percent inflation that the BoJ has long set as its target — a figure seen as key to turbocharge the world’s third largest economy — despite a barrage of stimulus and monetary easing packages. Japan’s central bankers said they would continue to monitor “downside risks to economic activity and prices, mainly regarding developments in overseas economies” after their two-day meeting finished on Tuesday.
The BoJ has argued that prolonged periods of low growth and low inflation have created a “deflation mindset” that continues to weigh on the national economy.But the bank says that Japan’s economy has been on “a moderate expanding trend”. “We are clearly indicating that we shall not hesitate to take additional easing measures if there is a greater possibility that the momentum toward achieving the price stability target will be lost,” BoJ governor Haruhiko Kuroda told a press conference.
Investors expect the US Federal Reserve to cut its policy rate by 25 points after its policy meeting on Wednesday.Last week, the European Central Bank suggested that it could offer a new stimulus package and cut rates further in a bid to drive up inflation and to kick start the regional economy.Kuroda, while avoiding comment on the possible impact of the expected Fed rate cut, said the moves by his US and European peers showed “the significance of the uncertainty that surrounds the global economy”.
The prolonged trade war between the US and China has particularly concerned policymakers and economists, with the rise of Boris Johnson as the British prime minister also raising fears about the prospect of a no-deal Brexit.Kuroda added that he believed that the Japanese government has taken adequate steps to offset the negative impacts of a planned consumption tax hike from eight percent to 10 percent in October.
