The Bank of Japan kept monetary policy steady on Thursday and clarified its intention to keep interest rates very low for a prolonged period, committing to do so at least through around the spring of next year.
The Bank of Japan kept monetary policy steady on Thursday and pledged to keep interest rates “extremely low” at least through early 2020, giving a specific timeframe for the first time on how long borrowing costs will remain super-low. The central bank said it decided to clarify its forward guidance — its communication to markets on how it intends to steer policy in the future — to show its resolve to maintain powerful easing and hit its elusive 2 percent inflation target.
“The BOJ intends to maintain the current extremely low levels of short-term and long-term interest rates for an extended period of time, at least through around spring 2020,” it said in a statement announcing its policy decision.
Until now, the BOJ did not offer specifics on how long it would maintain very low rates, saying only that it would be “for an extended period of time.”
As widely expected, the BOJ maintained its short-term rate target at minus 0.1 percent and a pledge to guide long-term yields around zero percent at its two-day meeting on Thursday.
It also reiterated it will keep buying assets such as government bonds and exchange-traded equity funds.
The BOJ also announced steps to make its monetary easing framework more sustainable, such as expanding the type of collateral it accepts as collateral for supplying funds to financial institutions.
Slowing global demand and simmering trade tensions have hurt Japan’s exports and business sentiment, testing the BOJ’s projection that the economy will keep expanding moderately.
Years of heavy money printing have failed to fire up inflation to the BOJ’s 2 percent target and left it with little ammunition to fight the next recession.
Prolonged easing has also added to stresses on regional banks, already facing slumping profits due to an ageing population and an exodus of borrowers to big cities.