The Bank of Japan said Friday that an economic slowdown in China and some other countries is beginning to weigh on exports and production at home.
After a two-day meeting, the central bank’s board decided to maintain its monetary policy of asset purchases and ultralow interest rates, measures aimed at lifting stubbornly low inflation.
It maintained its headline assessment that the economy is “expanding moderately,” but warned that exports and industrial output have been “affected by the slowdown in overseas economies.”
That was a less optimistic view than in January when the board said both exports and production were on an “increasing trend.”
Recent data have shown economic expansion waning in parts of Europe and China, with Asia’s biggest economy seeing its lowest growth in nearly three decades last year.
Uncertainty over the global economic outlook has led central banks in the United States and the eurozone to freeze plans to hike interest rates.
Japan has also been affected. According to one key indicator, the latest expansionary phase, claimed by the government of Prime Minister Shinzo Abe to be the longest since the end of World War II, may have already ended late last year.
The BOJ Policy Board voted 7-2 to maintain a short-term interest rate policy of minus 0.1 percent and long-term yields near zero percent, as well as a pledge to keep rates extremely low for “an extended period of time.”
Goushi Kataoka and Yutaka Harada, who have advocated expanding monetary stimulus, dissented.
The central bank will also continue purchasing such risky assets as exchange-traded funds.
The BOJ has continued aggressive monetary easing since April 2013 in pursuit of a 2 percent inflation target to dispel the country’s deflationary woes. In September 2016, it changed its policy framework from expanding the monetary base to targeting interest rates.
But inflation remains below 1 percent as tepid wage gains keep households from spending.
Gov. Haruhiko Kuroda has maintained that upward momentum in prices remains intact, though he has acknowledged that it may take more time than previously thought to reach the target.
Kuroda defended the 2 percent inflation target that guides his monetary stimulus program after the government advocated taking a flexible approach to the goal.
“There’s no change to the BOJ’s policy of aiming to bring about stable prices while considering the economy, prices and the financial environment overall,” Kuroda told a news conference when asked if he is sticking with the 2 percent target.
With policy side effects piling up, there are growing calls for the BOJ to rethink its commitment to 2 percent inflation — which many economists now deem unrealistic. Finance Minister Taro Aso this week joined the fray, saying that things had changed since the BOJ and the government agreed to the target in 2013 and that sticking to it without flexibility could be problematic.