The Bank of Japan left its key short-term interest rate unchanged at -0.1 percent during its January meeting - Photo: AP

JAKARTA (TheInsiderStories) – The Bank of Japan left its key short-term interest rate unchanged at -0.1 percent during its January meeting on Tuesday (01/21) and kept the target for the 10-year Japanese government bond yield at around 0 percent. It also maintained guidance that commits it to keep rates at current low levels or even cut them, until risks keeping it from achieving its 2 percent inflation goal subside.

At the same time, policymakers revised up their growth projection for the 2019 fiscal year beginning in April to 0.9 percent from an estimate of 0.7 percent made in October, helped by a boost from the government’s fiscal stimulus.

In its quarterly report, the BOJ’s policy board said it expects the economy to grow 0.8 percent in the year ending March 2020, compared with a forecast of 0.6 percent in the previous report in October. It expects 0.9 percent expansion in the year ending March 2021, compared with an earlier forecast of 0.7 percent.

Last month, Prime Minister Shinzo Abe’s cabinet approved a US$120 billion stimulus program, designed to help recovery from a typhoon in October and address downside risks to the economy.

The BOJ expects core consumer prices, excluding fresh food, to rise 1.4 percent from a year earlier in the year ending March 2022, compared with a 1.5 percent projection for that year made in October and lower than the bank’s 2 percent target.

Japan’s stock market did not like the news, with the Nikkei NIK, -0.88 percent, falling 0.9 percent in early trading Tuesday, AP reported. China stocks were hard hit early Tuesday. Hong Kong was taking the worst of it, with the Hang HSI, -2.29 percent index down nearly 2 percent in early trading after Moody’s downgraded the territory’s credit rating. The Shanghai Composite SHCOMP, -1.04 percent was off 1.0 percent and the Shenzhen Composite 399106, -0.75 percent was 0.8 percent lower.

A widening outbreak of a mysterious pneumonia-like virus helped propel shares of some Chinese drugmakers to multiyear highs, while travel stocks fell, as investors made bets on the potential economic impact of the disease in the region, it said.

BOJ governor Haruhiko Kuroda will hold a news conference this afternoon to explain the decision. Days ago, the governor said would not hesitate to ease monetary policy further if necessary in order to maintain momentum toward a 2 percent inflation target. It expected consumer inflation would accelerate toward the target, amid positive output gap and rises in inflation expectations.

“We will adjust policy as necessary to maintain momentum towards our price stability target while examining risks. The consumer inflation, which is hovering around 0.5 percent, would accelerate towards the 2 percent target. But the inflation trend will be affected for the time being by declines in oil prices,” Kuroda told a quarterly meeting of the central bank’s regional branch managers.

The central bank, he went on, will not hesitate to take additional easing steps if risks heighten to an extent that the momentum towards the price target is undermined. Kuroda held to the BOJ’s view that the world’s third-largest economy will see moderate growth despite weak exports, output and business mood, which have been hit by the global slowdown and natural disasters at home. The economy will continue to expand moderately as the ripple effects from slowing global growth on domestic demand will be limited, he added.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com