The Bank of Japan left its monetary stimulus unchanged as it updated price forecasts that confirm it won't meet its inflation target for years to come.
As predicted by all 46 economists surveyed by Bloomberg, the BOJ stuck with its policy interest rates and asset-purchase targets, it said in a statement Wednesday. The central bank forecast in its quarterly outlook report that inflation will remain below its 2 percent target through until at least early 2021.
This will see it fall even further behind its global peers in shifting away from crisis-era monetary policies, as the Federal Reserve raises interest rates and the European Central Bank halts its bond-purchase program. While continuing with ultra-low borrowing costs and a massive asset-purchase program contributes to rising debt and financial risks in Japan, it is also capping gains in the yen, which helps exporters and the stock market.
The BOJ changed its view on risks to the economy in the fiscal year ending in March 2019, saying they are skewed to the downside, compared with “generally balanced” previously.
Any comments from Kuroda’s on the impact of stimulus on Japanese banks will also be under the spotlight. The BOJ noted banks’ weakening profitability in its semi-annual financial system report released last week, and expressed concern that because of their condition an external shock could cause them to pull back from lending more than usual, putting the economy at risk.