The US Federal Reserve has raised interest rates and the European Central Bank has also taken a step in the same direction. Japan, on the other hand, continues undeterred on the opposite course.
Japan’s central bank is bucking the global tightening trend, keeping the reins extremely loose despite rising inflation and the yen’s sharp slide.
While the US Federal Reserve had raised its key interest rate sharply the day before, the Bank of Japan (BoJ) decided on Friday after a two-day meeting to leave its most important monetary policy levers unchanged. Short-term interest rates are to remain at minus 0.1 percent and long-term rates at around zero. The BoJ is also sticking to its purchases of government bonds and shares.
The Japanese central bankers are thus continuing to pursue the opposite course to their colleagues in Europe and the USA. The yen continued to depreciate rapidly against the dollar in response to the BoJ’s decision, but then recovered. However, trading on the foreign exchange market continued to be volatile.
The Japanese currency fell to a 24-year low against the dollar this week. The yen’s weakness has fueled market concerns that the BoJ’s stance will exacerbate inflation and hurt the economy, rather than boosting it with low interest rates. On the other hand, the central bank’s decision to stick to its course of loosening monetary policy was expected.
Although prices are also rising in Japan, inflation is mainly being driven by high energy prices. Before the decision was made, BoJ governor Haruhiko Kuroda indicated that, despite the dramatic weakening of the yen, there would be no tightening of the reins for the time being.
Source: Stern
Jane Stock is a technology author, who has written for 24 Hours World. She writes about the latest in technology news and trends, and is always on the lookout for new and innovative ways to improve his audience’s experience.
