The Bank of Japan said Tuesday that prospects of the world’s third-largest economy sustaining the 2% inflation target were “gradually heightening,” after the central bank expectedly retained its ultra-loose monetary policy at its first meeting this year.
The BOJ decided unanimously to keep interest rates at -0.1%, and stuck to its yield curve control policy that keeps the upper limit for 10-year Japanese government bond yield at 1% as a reference, according to a policy statement released Tuesday after a two-day meeting. This was in line with the expectations of economists polled by Reuters.
“We were able to confirm that the economy is moving in line with our projections on inflation,” Governor Kazuo Ueda said in a press conference in Tokyo, according to a Reuters translation.
“Our core-core inflation forecast is at 1.9%, very close to our 2% target. This was the case in October but it happened again this time, after close scrutiny.”
Japan’s central bank defines “core-core inflation” as inflation that excludes growth in food and energy prices, while core inflation is inflation that excludes only food prices.
“This is the biggest factor that made us more convinced than before that the likelihood (of sustainably achieving our price target) is gradually heightening,” Ueda added. “But it’s hard to quantify how close we’ve come.”
The yen strengthened 0.7% to 147.4 yen against the dollar and the Nikkei 225 equity benchmark closed 0.1% lower after briefly nearing a fresh three-decade high. Yields on the 10- and 30-year JGBs inched higher, while those on shorter-term bonds crept lower.