The Bank of Japan maintained its ultra-loose monetary policy at its September meeting after tweaking its stance in July.
The policy board voted 7-2 to purchase government bonds so that the yield of 10-year JGBs will remain at around zero percent, the BoJ said Wednesday.
The board retained the -0.1 percent interest rate on current accounts that financial institutions maintain at the bank.
The BoJ will conduct purchases of Japanese government bonds in a flexible manner so that the outstanding amount will increase at an annual pace of about JPY 80 trillion.
The bank intends to maintain the current extremely low levels of short and long-term interest rates for an extended period of time, taking into account uncertainties regarding economic activity and prices.
Regarding economic outlook, the bank said Japan’s economy is likely to continue its moderate expansion.
Inflation is likely to increase gradually toward 2 percent, mainly on the back of the output gap remaining positive and medium- to long-term inflation expectations rising, BoJ added.
The sales tax hike currently scheduled for next year will probably result in a sharp slowdown in domestic demand, and the board is starting to get jittery about the impact of the global trade war on external demand, Marcel Thieliant, an economist at Capital Economics, said.
With inflation set to remain well below the Bank’s 2 percent target, policy tightening therefore looks like a remote prospect, the economist observed. The bank is likely to keep its policy rate as well as its target for 10-year JGB yields unchanged beyond 2020, Thielant added.