Business / Economy

Bank of Japan maintains ultraloose policy as trade tensions cloud global outlook

Kyodo

The Bank of Japan kept its ultra-easy monetary policy unchanged Thursday, to underpin the economy amid growing uncertainty over a global economic outlook clouded by the U.S.-China trade war.

At the end of its two-day meeting, which came as inflation continued to run under its 2 percent target, the BOJ Policy Board voted 7 to 2 to maintain short-term interest rates at minus 0.1 percent and keep long-term rates near zero — a move that was widely expected by financial markets.

Of the two board members who opposed the decision, Goshi Kataoka called for additional monetary easing while Yutaka Harada, another vocal advocate of aggressive easing, also dissented.

The board voted unanimously to leave its massive asset purchase program unchanged.

“Japan’s economy has been on a moderate expanding trend, with a virtuous cycle from income to spending operating, although exports and production have been affected by the slowdown in overseas economies,” the BOJ said in a statement released after the meeting, maintaining its basic assessment.

“Downside risks concerning overseas economies are likely to be significant, and it is also necessary to pay close attention to their impact on firms’ and households’ sentiment in Japan,” it said.

Mario Draghi, president of the European Central Bank, said at a symposium Tuesday that the ECB could additionally expand its quantitative easing program if the inflation outlook in the euro area does not improve.

The U.S. Federal Reserve, which ended its own two-day meeting on Wednesday, held interest rates steady but pointed to possible rate cuts in the future, citing uncertainty over the economic outlook amid trade tensions with China.

Some economists say Japan’s planned consumption tax hike in October could also force the BOJ to shift toward additional easing, as the increase — from 8 percent to 10 percent — is expected to hurt household and business spending and subsequently put downward pressure on inflation.