TOKYO, March 16 (Xinhua) -- The Bank of Japan (BOJ) on Thursday opted to maintain its current easing measures at the current levels while taking time to allow the effects of the U.S. Federal Reserve's decision overnight to raise its policy rate for the first time since December to take hold.
By a majority vote of 7-2, the central bank's policy board voted at the conclusion of its two-day meeting to keep its 10-year Japanese government debt yield target at around zero percent and maintain its interest rate of 0.1 percent for some funds held at the BOJ by commercial banks.
The bank also reiterated its views on the economy from last month stating Wednesday that the Japanese economy "has continued its moderate recovery trend."
The BOJ's latest stance on policy comes as the yen rose to a two-week high of 113.17 against the U.S. dollar overnight as the Fed indicated a gradual pace of interest rate increases for the rest of the year, although it raised interest rates overnight as expected.
In a press conference following the two-day meeting, BOJ Governor Haruhiko Kuroda said that he'd be watching the impact of the Fed's latest move, particularly on emerging economies.
"I don't think U.S. interest rate developments will immediately have a severe impact on emerging economies. But we need to watch developments carefully," Kuroda said.
As for Japan specifically he said that the inflation trend has been moving sideways and that maneuvers henceforth will continue to be made to hit the price target as early as possible.
"In Japan, trend inflation has been moving sideways. The momentum for inflation to accelerate to 2 percent remains in place but lacks strength," said Kuroda.
"The BOJ will continue to promote powerful monetary easing under the yield curve control framework to achieve its price target at the earliest date possible," remarked the BOJ chief.
On 10-year bond yields specifically, Kuroda said that the underlying trend of inflation needs to be examined, but the overall yield curve will not be changed rashly, Kuroda said.
"We need to look at various price indicators as well as factors that determine underlying trend inflation, such as the output gap and medium-to-long-term inflation expectations," he continued.
"We won't immediately change our yield target just because a particular price indicator reaches a certain level," he said.
The BOJ since September adopted a yield control curve policy which functions to keep long-term interest rates exceedingly low by adjusting the amount of its bond purchases.
The policy has come under scrutiny and criticism recently for its durability and sustainability, as yield and debt prices move inversely to each other.
"We haven't said we will peg 10-year yields exactly at zero percent. We're saying we will aim to guide yields around zero percent, with some room for allowances. Our yield curve control is functioning smoothly and I expect it to do so in the future," Kuroda explained.
"Some market participants believe core consumer inflation will approach 1 percent in the latter half of this year. That might very well happen. But we won't automatically raise our yield target just because this happens," the BOJ chief stated.
In terms of protectionism, the head of the central bank said that Japan's position remains the same and believes that free trade and investment will lead to the betterment of global trade and growth.
"Not only the G20 but the IMF and OECD have also said from the past that protectionism damages global trade and global economic growth, and that it is necessary to maintain free trade and investment. Japan's stance on this will not change," Kuroda concluded.
