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The Bank of Japan keeps its monetary policy unchanged

The Bank of Japan keeps its monetary policy unchanged

A pedestrian walks near the Bank of Japan building in central Tokyo on July 28, 2023.

richard a. brooks | AFP | Getty Images

The Bank of Japan kept interest rates unchanged on Friday after its monetary policy meeting, keeping its benchmark interest rate at 0%-0.1%.

This is in line with expectations of economists polled by Reuters.

While the move was expected, it comes after inflation in Tokyo in April was lower than expected, with core inflation at 1.6% compared to Reuters' expectations of 2.2%.

The Bank of Japan also said it would continue to conduct bond purchases in line with the March decision. The bank said earlier in March that it had bought bonds worth about six trillion yen ($83.5 billion) per month in the past.

There was no comment from the Bank of Japan regarding this matter yenwhich has weakened steadily since the Bank of Japan ended its negative interest rate policy last month and scrapped its yield curve control policy.

The currency breached the 156 level against the US dollar on Friday after the decision, and was recently trading at 156.11.

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Separately, the central bank also released its second-quarter outlook for Japan's economy, raising its forecast for inflation in fiscal 2024.

The Bank of Japan now expects inflation to be between 2.5% and 3% for fiscal 2024, up from 2.2% to 2.5% in its January forecast.

Inflation is then expected to slow to “about 2%” in fiscal years 2025 and 2026, the bank added.

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The Bank of Japan also lowered its GDP growth forecast for fiscal year 2024 to a range between 0.7% and 1%, down from January's forecast of growth between 1% and 1.2%.

Adaptation policy for survival

In light of the outlook report, the Bank of Japan said that moving forward with its monetary policy will depend on future developments in economic conditions and prices. But she said easy financial conditions would be maintained “for the time being.”

The Bank of Japan acknowledges that uncertainties surrounding these economic and financial developments at home and abroad remain high. But if its forecasts come true and core inflation increases, the central bank said it would “adjust the degree of monetary easing.”

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