TOKYO: The Bank of Japan kept interest rates steady on Friday (Sep 20) and revised up its assessment on consumption, signalling its confidence a solid economic recovery would allow the central bank to raise interest rates again in coming months.
As widely expected, the BOJ held short-term interest rates steady at 0.25 per cent at its two-day meeting but noted improving domestic conditions, which help shore up the case to continue unwinding years of extraordinary monetary stimulus.
“Private consumption has been on a moderate increasing trend despite the impact of price rises and other factors,” the BOJ said in a statement announcing the decision.
The assessment was more optimistic than the previous view that consumption was resilient.
“Our decision on monetary policy will depend on economic, price and financial developments at the time,” BOJ Governor Kazuo Ueda said at a press conference after the meeting.
“Japan’s real interest rates remain extremely low. If our economic and price forecasts are achieved, we will raise interest rates and adjust the degree of monetary support accordingly.”
The BOJ ended negative interest rates in March and hiked short-term rates to 0.25 per cent in July, in a landmark shift away from a decade-long stimulus programme aimed at firing up inflation.
The yen pared losses and the Nikkei average saw gains shrink after the announcement, as the BOJ’s upbeat view on the outlook kept alive market expectations of a near-term rate hike.
“The upgrade in the BOJ’s consumption assessment shows it is becoming increasingly convinced that things are on track, with rising wages pushing up household income and spending,” said Naomi Muguruma, chief bond strategist at Mitsubishi UFJ Morgan Stanley Securities.
“If upcoming data further underscores the BOJ’s optimism, we’ll likely see another rate hike in December,” she said.
INFLATION ACCELERATES
Ueda has stressed the BOJ’s
