But one economist says the fact that the BOJ has not ramped up asset purchases shows it is aware of the growing side-effects of prolonged easing
Bank of Japan governor Haruhiko Kuroda. Picture: REUTERSThe Bank of Japan put a timeframe on its forward guidance for the first time by telling investors that it will keep interest rates at super-low levels for at least one more year, in a move to dispel any doubt over its commitment to ultra-loose policies.
“Current very low rates will be maintained at least until the spring of 2020, he said. “the timeframe could be much longer than that” if the economy weakens, he added. “As the global economy slows further, the Federal Reserve could cut interest rates later this year or early next year. The BOJ may be forced into further easing around the same time.”
The BOJ also forecast consumer inflation would hit 1.6% the following year, conceding that price growth will fall short of its target for at least three more years. Core inflation in March was 0.8%.Under the new guidance, the BOJ said it would maintain current extremely low short- and long-term rates “for an extended period of time, at least through around spring 2020”.
“Given uncertainty over the outlook, we have no intention of raising interest rates at least until the spring of 2020,” Kuroda said. “I don't believe we must review our interest rate targets at all cost straight after the spring of 2020.” “We will adjust monetary policy swiftly if necessary to sustain the economy's momentum for achieving our price goal,” he said, signalling the BOJ's readiness to ease more.
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