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Financial News: BoJ Retains Policy Rate; Pledges Further Easing If

BoJ Retains Policy Rate; Pledges Further Easing If Needed

07/30/2019 - 00:41:00 (RTTNews)

(RTTNews) - The Bank of Japan maintained its ultra-loose monetary policy and pledged to ease further if needed to achieve inflation target.

As widely expected, the Policy Board of the BoJ, on Tuesday, voted 7-2 to maintain interest rate at -0.1 percent on current accounts that financial institutions maintain at the bank.

The bank said it will purchase government bonds so that the yield of 10-year JGBs will remain at around zero percent.

Further, the bank will purchase JGBs in a flexible manner so that their outstanding amount will increase at an annual pace of about JPY 80 trillion.

The bank said it will not hesitate to take additional easing measures if there is a greater possibility that the momentum toward achieving the price stability target will be lost.

While it may ease policy a bit further, perhaps by increasing its ETF purchases, it will leave both its policy rate as well as the target for 10-year government bonds unchanged over the coming years, Marcel Thieliant, an economist at Capital Economics, said. The BoJ said inflation is likely to increase gradually towards 2 percent, mainly on the back of the output gap remaining positive and medium-to long-term inflation expectations rising.

However, the bank lowered its inflation forecast for fiscal 2019 to 1 percent from 1.1 percent. The projection for the fiscal 2020 was downgraded to 1.3 percent from 1.4 percent.

The bank also downgraded its growth outlook for the fiscal 2019 to 0.7 percent from 0.8 percent but retained its projection for the fiscal 2020 at 0.9 percent.

The bank forecast the economy to expand 1.1 percent in fiscal 2021 and inflation at 1.6 percent.

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