The Bank of Japan kept its key short-term interest rate unchanged at -0.1% and that of 10-year bond yields at around 0% in its June meeting by unanimous vote. The board also made no changes to a 0.5% cap set for bond buying. While mentioning that inflation in the country would slow later this year, policymakers added they would patiently continue with monetary easing and respond to uncertainties faced by the economy and the dynamics of prices as well as financial conditions. By doing so, the central bank aims to achieve a price stability target of 2% in a sustainable manner, accompanied by wage increases. Friday’s move was in sharp contrast with that of the ECB, as the latter raised borrowing costs to a 22-year high and flagged further rate hikes. In the US, the Fed signaled it wasn’t done yet with its fight against inflation. On the economy as a whole, the board viewed that output in Japan was likely to recover toward the middle of FY 2023, supported by pent-up demand.
