TOKYO (Alliance News) – The Bank of Japan refrained from expanding its monetary stimulus as policymakers await to see the impact of the negative interest rate introduced in January.
Governor Haruhiko Kuroda and his board members decided by an 8-1 majority vote to hold its target of raising the monetary base at an annual pace of about JPY 80 trillion.
Policymakers voted 7-2 to maintain the -0.1% interest rate on current accounts that financial institutions maintain at the bank.
The bank said it would take additional easing measures if needed for achieving the price stability target.
Kuroda is set to hold a customary press conference later today.
The bank had introduced negative interest rate in January in order to achieve its 2% inflation at the earliest possible time.
The bank said the economy has continued its moderate recovery trend, although exports and production have been sluggish due mainly to the effects of the slowdown in emerging economies.
The economy contracted 1.1% in the fourth quarter of 2015. The outlook for the first quarter also looks far from bright.
The bank downgraded its view on exports saying that ‘the pick-up in exports has recently paused.’ Nonetheless, the bank said private consumption has been resilient.
Marcel Thieliant, a senior Japan economist at Capital Economics, said the bank will lower the interest rate on the policy-rate balance further to -0.3% from -0.1%.
However, in light of the disappointing market reaction to negative interest rates, the economist also expects an increase in the pace of asset purchases to JPY 90 trillion from the current JPY 80 trillion.
The Japanese yen recovered from early lows against the other major currencies after the monetary policy announcement. The yen climbed to a 4-day high of 113.22 against the US dollar.
Copyright RTT News/dpa-AFX