The Japanese flag flies above the Bank of Japan's headquarters building (below) in Tokyo on April 27, 2022.
Nogi Kazuhiro | AFP | Getty Images
The Bank of Japan kept its policy rate unchanged at about 0.25% – the highest since 2008 – at the end of a two-day meeting on Friday.
This decision: Reuters poll estimatesEconomists largely expect further rate hikes before the end of the year.
The decision comes as the Bank of Japan is carefully tackling the challenge of normalizing monetary policy after a long period of ultra-loose monetary policy, and doing so without sending a shock wave through the economy.
The yield on the 10-year government bond fell 0.4 basis points and the yen was little changed to 142.52 against the dollar. The Nikkei average, which had risen 2 percent, remained at the same level after the decision.
Bank of Japan Governor Kazuo Ueda said last month: If the economy and inflation perform as the central bank predicts, it will continue to raise interest rates.
The Bank of Japan stands out as an outlier in its tightening stance at a time when most of the world's central banks have turned to easing monetary policy. The U.S. Federal Reserve on Thursday cut interest rates by 50 basis points to a range of 4.75% to 5.0%.
The Bank of Japan has long kept interest rates near or below zero as it aims to use massive monetary stimulus to stoke inflation and boost economic growth.
The Fed eliminated negative interest rates in March and raised its benchmark interest rate to 0.25% in July, believing the economy was on track to achieve its 2% inflation target.
Japanese Core Consumer Price Index Inflation rose 2.8% year-on-year, in line with Reuters forecasts, after rising 2.7% in the previous month. Inflation excluding fresh food and energy costs rose 2.0% after rising 1.9% in the previous month.
This marks the fourth consecutive inflation rise, giving the Bank of Japan room to continue tightening monetary policy.
Japan Second quarter GDP growth revised down The annualized growth rate was 2.9 percent from the previous quarter, a slower economic recovery than the government's initial forecast and below the 3.2 percent growth forecast in a Reuters poll.
The decision also came just one week before the LDP presidential election on September 27, whose winner is expected to become the new prime minister from early October.
