Bank of Japan Bucks Global Trend of Monetary Tightening

Wall Street Journal, Jun 15, 2018
by Megumi Fujikawa

TOKYO—The Bank of Japan decided Friday to stick to its ultra-easy monetary policy, bucking the global trend largely because inflation in Japan isn’t getting close to the central bank’s 2% target.

The decision contrasts with other central banks including the Federal Reserve, which on Wednesday raised its policy rate for the second time this year and set the stage for two more increases in 2018. The European Central Bank on Thursday laid out plans to wind down its giant bond-buying program by the end of this year.

“It is appropriate for Japan to patiently continue current monetary easing,” Gov. Haruhiko Kuroda said at a news conference. “The divergence of monetary policies reflects different economic and price conditions in each country.”

Japan’s core consumer-price index, which excludes fresh food prices, rose 0.7% from a year earlier in April, decelerating for two consecutive months.

Given its distance from the 2% inflation target, it is too early to talk about details of its exit strategy, Mr. Kuroda said. However, as shown by examples at the Fed and ECB, ultralow short-term interest rates and an expanded balance sheet would be the two main issues the BOJ has to deal with when the time comes, he added.

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