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BoJ Keeps Monetary Policy Unchanged

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The Bank of Japan decided to leave its monetary stimulus unchanged on Thursday after the U.S. Federal Reserve resorted to another rate hike.

Governor Haruhiko Kuroda and his board members decided by a 7-2 vote to maintain the central bank's target of raising the amount of outstanding Japan government bond holdings at an annual pace of about JPY 80 trillion.

The BoJ board also voted to retain the -0.1 percent interest rate on current accounts that financial institutions maintain at the bank.

The central bank will purchase government bonds so that the yield of 10-year JGBs will remain at around zero percent.

While the consensus is increasingly shifting towards expectations of policy tightening in coming months, Marcel Thieliant, a senior economist at Capital Economist, said he retains the view that the bank will leave policy unchanged for the foreseeable future.

The bank expects inflation to increase from about zero percent and become slightly positive, reflecting developments in energy prices. Inflation is forecast to rise toward 2 percent target thereafter.

The BoJ reiterated that the economy is likely to turn to a moderate expansion. According to BoJ's assessment, domestic demand will follow an upward trend and exports would follow a moderate rising trend on the back of improving overseas economies.

The U.S. Federal Reserve on Wednesday lifted its target range by 25 basis point to 0.75 percent to 1 percent.

The BoJ said some of the risks to Japan's outlook are the developments in the U.S. economy and the impact of its monetary policy on the global markets, developments in commodity-exporting economies, namely China and the consequences of 'Brexit'.

by RTT Staff Writer

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