The Bank of Japan maintained ultra-easy monetary policy on Friday despite stronger-than-expected inflation, signalling it will remain a dovish outlier among global central banks and focus on supporting a fragile economic recovery.
"Despite upside surprises on the growth and inflation fronts, we believe the BOJ will maintain the status quo for another year or so to assess whether the economy is on track to achieving 2% inflation within Governor Ueda's five-year term," said Shigeto Nagai, head of Japan Economics at Oxford Economics.
The yen fell 0.3% against the dollar to 140.72 and tumbled to a fresh 15-year low of 153.925 against the euro after the announcement. Japan's benchmark 10-year government bond yield fell to 0.4% after the decision, well off the implicit 0.5% cap set for the maturity. "But it may be forced to act if the yen weakens further and drives up import costs, angering the public. The trigger for a YCC shift could be a sharp yen fall."
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