At a two-day rate review that ended on Tuesday, the Bank of Japan kept its interest rate targets steady but for the first time adopted a forward guidance on future policy, saying it will keep rates “very low” for an “extended period of time.”
As its huge purchases dry up market liquidity and efforts to cap bond yields face difficulty, the central bank also said it would allow yields to rise more naturally and could slow asset buying if market conditions allowed.
Its governor, Haruhiko Kuroda, said the changes in its framework were partly to stamp out speculation that the central bank was about to exit its super loose monetary policy or raise rates.
The decision highlights the dearth of ammunition the BOJ has left to fire up stubbornly weak inflation, even as other major central banks emerge from crisis-mode policies and stock up policy tools to fight another recession.
