The BoJ kept the course of its monetary policy

The Central Bank of Japan (BoJ) kept its monetary policy steady on Thursday after the gloomy global growth forecasts prompted other big central banks to hint for additional stimulus. The BoJ reiterated that global risks are on the rise as trade strains and uncertainty about US economic policies continue to shake the financial markets, indicating that the Japanese regulator is also targeting increased monetary stimulus.

Expectably, the Bank of Japan retained its target for short-term interest rates of -0.1% and pledged to keep yields on 10-year government bonds around zero percent.

The Bank also retained its decision to continue to buy government securities so the stock balance would increase by about 80 trillion JPY (738 billion USD) per year.

“The risks associated with foreign economies are big, so we have to watch closely how they affect Japan’s corporate and household sentiment”, said the BoJ.

Central banks around the world are moving toward relief as the re-escalating US-China trade war increases the pressure on the slowing global economy. The US Federal Reserve has announced that it is not expecting interest rate cuts in 2019 but warns that it is ready to fight risks by reducing interest rates, depending on the conditions.

Many Japanese bankers, however, are cautious about expanding incentives as soon as the years of hard money printing left them with little money. Some analysts argue that BoJ can strengthen its future direction and hold the current ultra-low interest rates for a longer time if future Fed interest shrinkage provokes an unwanted jump in the yen’s price that damages island exports.

There is a good chance for the Fed to cut interest rates in July. If that happens, the BoJ will strengthen its guidelines to keep control of the yen. The next move of the Japanese regulator will depend on how the US economy will develop and what will happen to the trade war between Washington and Beijing.

During the latest April interest rate review, the Bank has adopted guidelines committing itself to keep the current low levels until at least the spring of 2020.

Japan’s economic growth accelerated to 2.1% YoY in the January-March period, but many analysts predict that growth will slow down in the coming quarters against a backdrop of the continued trade war. The planned increase in sales tax from 8% to 10% in October may also limit consumption.

The year-on-year consumer core inflation reached 0.9% in April, remaining well below the target of 2%, despite years of massive stimulus.