The Bank of Japan kept its monetary policy unchanged Sept. 19 and said it will review economic and price developments at its next meeting as it warned that momentum toward achieving its inflation target could be lost.
In a 7-2 vote, policymakers at the central bank kept the short-term policy rate at negative 0.1% and pledged to continue purchasing Japanese government bonds to keep 10-year yields at around zero percent. The decision came hours after officials at the U.S. Federal Reserve lowered the bank's benchmark interest rate by 25 basis points.
The yen traded 0.51% higher against the dollar at ¥107.90 shortly before 2 p.m. Tokyo time Sept. 19.
The central bank said Japan's economy is likely to continue expanding at a moderate pace despite the effects of slowing economies abroad. However, as downside risks from the slowdown abroad seem to be increasing, "it is becoming necessary to pay closer attention" to the possibility of losing momentum toward achieving the central bank's 2% inflation target.
The BoJ said it will therefore reexamine economic and price developments at the next monetary policy meeting at the end of October. The central bank repeated that it "will not hesitate" to ease monetary policy further to ensure that the path of inflation will not deviate from its target.
The central bank was earlier reported to be considering cutting rates further into negative territory while keeping yields on long- and short-term bonds from narrowing too much.
