TOKYO, July 21 (Reuters) – The Bank of Japan (BoJ) left interest rates unchanged on Thursday and warned of risks to a fragile economy, while raising its inflation forecast.
The move comes hours before the European Central Bank announces whether it is raising interest rates for the first time in more than a decade.
The BoJ has repeatedly said it is in no rush to lift its economic support measures, even though inflation has exceeded its 2% target due to rising fuel prices and raw material.
“Uncertainty about the Japanese economy is very high. We must remain vigilant about movements in financial and currency markets, and the impact they could have on the economy and prices,” the statement said. BoJ in its quarterly report, published after its meeting.
As expected, the Japanese central bank maintained the target for short-term rates at -0.1% and its commitment to contain the yield on ten-year government bonds around zero.
BoJ board members raised their inflation forecast for the year ending March 2023 to 2.3% from 1.9% previously. They also raised their forecast for the following year to 1.4% from 1.1%.
The BoJ, however, cut its growth forecast for the current financial year from 2.9% to 2.4% and warned of the potential impact of tensions in supply chains, the rising commodity prices and the coronavirus pandemic.
The BoJ’s decisions, which run counter to the strategies adopted by the world’s other major central banks, come at a cost, however: the yen is at its lowest level in 24 years, which increases the costs, which are already very high. , imports, and affects households and retailers. (Reportage Leika Kihara, with the contribution of Tetsushi Kajimoto, Daniel Leussink and Kantaro Komiya; French version Camille Raynaud)