The Bank of Japan leaves its ultra-accommodative monetary policy unchanged

Posted 18 March, 2022

The Bank of Japan did not change its ultra-accommodative monetary policy on Friday, thus remaining against the tide of the other major global central banks, even if inflation is also now accelerating in Japan, driven by energy prices.

The BoJ has kept the negative 0.1% interest rate it charges on banks' deposits with it and will continue to buy as many Japanese government bonds as needed to keep their ten-year yield around 0%, according to a press release.

The institution recalled that it intended to continue its quantitative easing policy "as long as necessary" to reach its inflation target of 2% "in a stable manner".

More and more economists expect this level to be reached in the coming months, but without the BoJ changing its monetary course.

Because Japanese inflation is hardly based on sound foundations for the moment.

Consumer prices should now "clearly" accelerate in Japan, the BoJ said on Friday, while stressing that their rise was mainly linked to the exceptional surge in energy prices and other raw materials.

Excluding fresh products, consumer prices rose 0.6% in February over one year in the archipelago, their strongest increase in two years, according to statistics published earlier on Friday.

Their growth thus remains very modest compared to that experienced by many other countries such as the United States or Germany, and which are pushing the American Federal Reserve (Fed) or the European Central Bank (ECB) to tighten their monetary policies.

Inflation in Japan is hardly fueled by the economic recovery at the moment.

The upturn in household consumption experienced in the fourth quarter of 2021 has already come to a halt at the start of the year due to a record wave of Covid-19 infections linked to the Omicron variant, noted the BoJ.

The institution also underlined on Friday the "extremely high uncertainties" generated by the war in Ukraine and the international sanctions against Russia on the evolution of economic activity and prices in Japan.

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