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Bloomberg
The Bank of Japan (BOJ) kept monetary policy unchanged, just hours after the Federal Reserve became the latest central bank to signal a willingness to cut interest rates in the face of rising threats to global growth.
The BOJ maintained its interest rates and asset purchases, it said in a statement. All 50 economists surveyed by Bloomberg had predicted no change.
The central bank still expects conditions to improve in the second half of the year, but escalating trade tensions are heightening concerns about global demand among policy makers and businesses.
For the first time in more than two years, a majority of economists now predict the BOJ’s next policy move will be to increase stimulus, and some see action as early as next month. Those expectations will be reinforced after both the Fed and European Central Bank this week indicated a readiness to shift to more accommodative policy.
Some BOJ watchers say Fed rate cuts, seen as increasingly likely, could force the BOJ’s hand by pushing the yen to what it would consider an uncomfortably strong level.
Any action by the BOJ will depend on Fed policy and its impact on the yen, and the BOJ will be unlikely to act unless the dollar falls below 100 versus the yen, said Yasunari Ueno, chief market economist at Mizuho Securities Co.
Ueno was among six analysts to recently predict the central bank would increase stimulus next month.
A stronger yen would hamper the BOJ’s efforts to hit 2 percent inflation. Core inflation expected to have fallen in May to 0.7 percent and is forecast to drop further in coming months. The dollar fell to as low as 107.55 versus the yen in Tokyo, extending losses following the Fed meeting.
Still, it won’t be that simple. The BOJ faces competing concerns about risks to the economy and the accumulation of side effects from six-plus years of radical stimulus. Kuroda told Bloomberg last week that the bank still has room for big stimulus, if necessary, but he also stressed the need to be wary of side effects.