The Bank of Japan’s policy-setting panel left its monetary policy unchanged Tuesday, dismissing speculation that its ultraeasy monetary grip might be coming to an end amid recent economic recovery signs.
After a two-day meeting, the Policy Board agreed to continuously inject liquidity into the financial system to shore up the recovery trend.
The decision is in line with BOJ Gov. Toshihiko Fukui’s pledge to maintain the so-called quantitative credit-easing policy until Japan moves out of deflation.
“The BOJ firmly believes that it should continue the current easy stance, and there is no room for speculation about that,” Fukui said.
The nine-member board decided unanimously to keep its target for the outstanding balance of banks’ deposits at the BOJ to a range between 30 trillion yen and 35 trillion yen.
Asked about the recent increases in long-term interest rates, he said the BOJ keeps a cautious eye not only on long-term interest rates but other financial markets as well.
Japan’s long-term interest rates have been on the rise, with the yield on the key 10-year Japanese government bond issue hitting a 44-month closing high of 1.85 percent on Monday due to growing expectations of a sustainable economic recovery.
The rises in long-term rates have drawn keen attention from the financial sector as they serve as a clue to help predict when the central bank will change the policy.
For the government, a jump in interest rates would harm its fiscal health by expanding debt-servicing costs, now helped by near-zero interest rates.