Japan’s central bank keeps negative interest rate unchanged

Bangkok: The Bank of Japan kept its longstanding easy credit policy unchanged on Tuesday, saying it will watch price and wage trends before raising its negative benchmark interest rate.

The BOJ policy decision was widely expected. But investors and analysts believe the central bank is tip-toeing toward a shift due to price increases that have left inflation above its 2 per cent target. The US dollar gained against the Japanese yen and stock prices surged after Tuesday’s decision. The benchmark rate of negative 0.1 per cent is meant to encourage banks to lend more and businesses and consumers to borrow more to spur the economy, the world’s third-largest.

The central bank also has purchased trillions of dollars worth of government bonds and other assets as part of its strategy of injecting more cash to spur growth as the Japanese population shrinks and grows older. Inflation has risen in Japan but at a much slower pace than in the US and other major economies, most recently at about 3 per cent. At the same time, the US dollar has risen against the Japanese yen as rates were raised to counter inflation that peaked at 9.1 per cent in the US That has undercut the purchasing power of the yen, raising costs for energy and other commodities.