Bank of Japan leaves policy unchanged, yen weakens
Source: AFP
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Japan's central bank left its ultra-easy monetary policy unchanged on Wednesday, a move that sent the yen plunging, despite heavy speculation it could again tweak a key lever.
The announcement after a two-day meeting saw the yen lose about 1.5 percent against the dollar, with the greenback buying 130.51 yen in the minutes after the decision, from around 128.45 earlier in the day.
The Bank of Japan shocked the market last month by adjusting one of its policy tools, widening the band in which it allows rates for 10-year Japan government bonds to move.
It said the move would "improve market functioning", and the surprise decision saw the Japanese currency gain ground against the dollar after months of weakening over the growing gap between Japanese and US central bank policy.
But the new range set last month has been breached regularly in recent days, intensifying speculation that the bank would have to act again.
For months, the bank has bucked the trend set by global peers and stood its ground on its loose monetary policy, convinced that inflation has not yet taken hold in Japan in a sustained fashion.
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Prices have risen consistently since the beginning of the year, and while they have not neared levels seen in other developed economies, they are at figures not seen in Japan since the 1980s.
BoJ Governor Haruhiko Kuroda, whose term ends this spring, has insisted though that the rises are largely temporary and linked to exceptional factors such as the war in Ukraine.
He has warned that the country is still far from achieving the bank's longstanding goal of sustained two-percent inflation, seen as key to stimulating a stagnant economy.
Ahead of the decision, analysts said even if the bank stood its ground now, it would remain under pressure to move soon.
"Speculation will remain that it will eventually review its policy," said Takehide Kiuchi, executive economist at Nomura Research Institute and a former BoJ policy board member.
"Market focus will now shift to the appointment of a new governor," he told AFP, noting that the bank needs to "make its policy flexible" whoever is appointed.
Source: AFP
