BoJ keeps policy rate steady, lowers inflation forecast

The Bank of Japan kept its benchmark interest rate on hold at the 2-day monetary policy meeting concluded Tuesday, extending the time limit for achieving its long-drawn inflation target of around 2 percent. This followed the last month’s major overhaul that saw policymakers shift the focus from quantitative easing to interest rate targeting.

The unchanged policy decision was made by a majority 7-2 vote, holding the interest rate at -0.1 percent, since January this year, pledging to maintain the 10-year JGB yield target at around zero percent, with holdings rising at an annual pace of around JPY80 trillion.

Japan's core consumer prices fell for a seventh straight month and household spending slumped in September, endorsing the central bank's view that it will take some time for inflation to accelerate to its 2 percent target as the economy stagnates. Analysts had not expected a back-to-back policy move after the BoJ switched its policy target to controlling interest rates from the pace of money printing in September, Reuters reported.

In a quarterly review of its forecasts, the BoJ cut its inflation forecasts for the next fiscal year ending in March 2018 to 1.5 percent from 1.7 percent in July. Meanwhile, Japan's economy expanded for the second straight quarter in April-June but many expect growth to remain modest for the rest of this year, with exports and output weak on sluggish global demand.