Japans central bank holds steady on interest rate stimulus

by Elaine Kurtenbach, The Associated Press Posted Mar 16, 2017 8:22 am MDT Last Updated Mar 16, 2017 at 9:20 am MDT AddThis Sharing ButtonsShare to TwitterTwitterShare to FacebookFacebookShare to RedditRedditShare to 電子郵件Email Japan’s central bank holds steady on interest rate, stimulus TOKYO – Japan’s central bank opted Thursday to retain its ultra-lax monetary stimulus, citing U.S. policy changes as one of the risks for the global economic outlook.The Bank of Japan gave no indication it was leaning toward cutting back on the massive purchases of government bonds it is using to support the world’s No. 3 economy by injecting hundreds of billions of dollars into the economy every year.The BOJ said, as usual, that Japan’s economy was on a “moderate recovery trend.” But it lacks the dynamism seen in the U.S. economy that led the Federal Reserve to raise the federal funds rate Wednesday by 0.25 percentage points to a range of 0.75 to 1 per cent.As expected, the BOJ kept its benchmark policy rate at minus 0.1 per cent.Among risks, it pointed to the potential impact of U.S. monetary policy on global financial markets.Under Gov. Haruhiko Kuroda, the BOJ has sought to spur price increases to stimulate more spending and borrowing by businesses and consumers. But inflation is stuck at about 0 per cent, far below the target of 2 per cent set four years ago. Companies are resisting government calls to raise wages enough to entice thrifty consumers into spending more, and Kuroda has given no hint he might seek to tighten credit anytime soon.“Even if price pressures do strengthen more rapidly than we anticipate, the Bank will want to make sure that it can see the whites of inflation’s eyes before it decides to withdraw stimulus,” Marcel Thieliant of Capital Economics said in a commentary.The 19-nation eurozone has likewise been tentative about “tapering,” let alone tightening policy. In December, the European Central Bank decided to continue bond purchases through the end of 2017 while reducing them from 80 billion euros ($84 billion) a month to 60 billion euros a month beginning in April.Last week, the ECB decided not to change the size or duration of its stimulus programs, judging a rise in annual inflation to near its own 2 per cent target to reflect increased oil prices rather than other more expansionary factors, such as higher wages for workers.The Fed’s rate hike did prompt China’s central bank to raise short term rates Thursday, though the People’s Bank of China kept its benchmark one-year commercial lending rate unchanged.Hong Kong’s central bank copied the Fed by raising its benchmark lending rate by one-quarter point to 1.25 per cent. The Asian finance hub’s currency is pegged to the dollar, so authorities are obliged to copy U.S. monetary policy. FILE – In this Jan. 29, 2016 file photo, a man walks past the Bank of Japan building. Japan’s central bank opted Thursday, March 16, 2017, to keep its monetary policy steady, as the U.S. Federal Reserve tightens and European Central Bank edges in that direction. The Bank of Japan ended a policy meeting by keeping the minus 0.1 percent benchmark interest rate unchanged while working toward a 2 percent inflation rate target. (AP Photo/Koji Sasahara, File)

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