The Bank of Japan left monetary policy unchanged even as it downgraded its assessment of inflation, falling further behind its global peers at the end of a busy week for central banks.
The BOJ maintained the settings on its yield-curve control program and asset purchases, it said in a statement Friday, a result forecast by all 45 economistssurveyed by Bloomberg. The central bank downgraded its assessment of inflation after raising it in January. It said it now sees the consumer price index in a range of 0.5 percent to 1.0 percent.
While the BOJ struggles, the Federal Reserve this week raised interest rates for the sixth time in 18 months and set a steeper rate-hike trajectory, while the European Central Bank plotted the end of its asset purchases this year.
“This week just deepens the market view that the Fed and ECB are in the camp of normalization and Japan isn’t," Masamichi Adachi, a senior economist at JPMorgan Chase & Co., said before the BOJ’s decision was released. "That should help weaken the yen.”
Governor Haruhiko Kuroda has emphasized the need to stay the course with stimulus. At its last meeting the central bank removed language that said it expected inflation to reach its 2 percent target around the fiscal year starting in April 2019.
JPMorgan and Bank of America Merrill Lynch are among those who in recent weeks have changed their forecasts, pushing back their expected timing of the BOJ’s first move toward policy normalization. In a Bloomberg survey, 88 percent of analysts said it wouldn’t start until 2019 or later.
Kuroda is almost certain to face questions about price momentum during his news conference later on Friday. Core inflation, which excludes fresh food, slowed for a second straight month in April, to 0.7 percent.
“Inflation has certainly been lower than would’ve been expected,” Federal Reserve Bank of St. Louis President James Bullard said in Tokyo last month. “It’s been frustrating in Japan, but it’s also been instructive for the rest of the world to understand what kinds of things can happen if inflation expectations get rooted at a low level.”