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Bank of Japan keeps interest rates extremely low despite US Fed tightening | Business and Economics

The BOJ sticks to global outliers as central banks elsewhere raise interest rates to curb inflation.

The Bank of Japan has kept interest rates extremely low and guided dovish policy as it seeks to reassure markets that it will continue to reverse the global tide on central banks tightening monetary policy. to combat high inflation.

The BOJ’s latest decision on Thursday came after the US Federal Reserve rallied 0.75 percentage points for the third time in a row on Wednesday and signaled more bull runs, underscoring its determination not to give up in the fight against inflation.

As widely expected, the BOJ left its target of -0.1% for short-term rates and 0% for 10-year government bond yields by a unanimous vote.

BOJ is still an exception among one global wave of central banks withdrawing stimulus to combat soaring inflation and will likely become the last major monetary authority in the world to have a negative interest rate policy.

Markets have focused on whether the BOJ will show early signs of changing its approach by tweaking its pledge to keep interest rates at “current or lower” and ramping up stimulus as needed. to support the economy or not.

BOJ Governor Haruhiko Kuroda is scheduled to hold a press conference to explain the policy decision on Thursday.

Japan’s core consumer inflation accelerated to 2.8% in August, beating the BOJ’s 2% target for a fifth straight month, as price pressures from raw materials and a weakening yen deepened. increase.

But Kuroda ruled out a short-term retraction of stimulus measures, arguing that wages need to rise more to reach the 2% inflation target in a sustainable manner.

Kuroda’s dovish message has weakened the yen, contradicting the government’s efforts to slow its decline through verbal threats of yen-buying intervention.

Once hailed for boosting exports, the weak yen has become a headache for Japanese policymakers as it pushes up the cost of already expensive imports of fuel and raw materials. .

The world’s third-largest economy expanded a year-on-year average of 3.5% in April-June, but its recovery was hampered by the resurgence of COVID-19 infections, restrictions on supply and raw material costs increase.

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