Japan’s central bank opted Friday to keep its benchmark interest rate at minus 0.1% but said it will fine-tune its bond purchases to allow greater flexibility.
The Bank of Japan said that extremely high uncertainties for the economy and prices required a more nimble approach than its previous policy.
It said it would offer to buy 10-year Japanese government bonds at 1% each business day, instead of the upper limit of 0.5% that was imposed under its “yield curve control program.”
It said its aim is still to keep long-term interest rates near zero percent.
The yield curve controls are part of a suite of central policies, including massive asset purchases, meant to keep credit cheap to try to spur investment and spending and prop up economic growth.
The BOJ is under pressure to adjust its policies as the Federal Reserve and other major central banks have raised interest rates to slow lending and curb inflation. Japan's inflation rate has lagged those in the U.S. and Europe but is now over 3%, adding to those pressures.
But the central bank has resisted raising its minus 0.1% benchmark rate out of concern that growth may slow given risks of recession in the U.S. and other major economies.
Meanwhile, the gap between Japan's negative benchmark rate and rates in the U.S. has caused the Japanese yen to weaken against the U.S. dollar, adding to price pressures in Japan and raising costs for consumers and manufacturers given the country's heavy reliance on imports whose prices have risen sharply since the pandemic.
Markets wobbled ahead of Friday’s announcement. Afterward, shares fell in Tokyo and the Japanese yen weakened against the U.S. dollar.
