“There is still some distance to 2%, if we look at it from the perspective of the expected inflation rate,” BOJ Governor Kazuo Ueda said at a news conference after the decision. “Considering the gap, I think we will conduct normal policy as I mentioned earlier, keeping the importance of maintaining an accommodative environment in mind.”
The Bank of Japan ended the most aggressive monetary stimulus program in modern history, scrapping the world’s last negative interest rate and a raft of unconventional tools, while leaving the course of additional hikes unclear.
The central bank set a new policy rate range of between 0% and 0.1%, shifting from a -0.1% short-term interest rate after saying its 2% inflation target had come into sight, according to a statement at the conclusion of its two-day meeting Tuesday. The BOJ also scrapped its complex yield curve control program while pledging to continue buying long-term government bonds as needed. It also ended its purchases of exchange-traded funds.
The bank’s indication that financial conditions will remain accommodative clearly showed its first hike in 17 years isn’t the beginning of a pedal-to-the-metal tightening cycle of the sort seen recently in the US and Europe. Still, its data-dependent guidance on future policy left market players in the dark about when subsequent rate increases will take place, prompting a slide in the yen through the 150 mark versus the dollar.
