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Bank of Japan keeps negative policy rate unchanged

The Bank of Japan decided to keep the negative policy rate unchanged at its Dec. 20 meeting, as part of efforts to achieve a price stability target of 2%.

In a 7-2 majority vote, the Bank of Japan decided to keep the minus 0.1% interest rate on policy rate balances in current accounts held by financial institutions at the central bank. The yield target for 10-year Japanese government bond remains at zero percent. The central bank will keep purchasing domestic government bonds at an annual pace of around ¥80 trillion.

The BOJ will keep purchasing exchange-traded funds and Japan REITs so that their amounts outstanding will increase at annual paces of ¥6 trillion and ¥90 billion, respectively. Meanwhile, the central bank will maintain its outstanding holdings of commercial paper and corporate bonds at ¥2.2 trillion and ¥3.2 trillion, respectively.

The central bank noted that Japan's economy has continued its moderate recovery trend, at par with most overseas economies.

In terms of domestic demand, business fixed investment has been on a moderate increasing trend, while public investment has been more or less flat, the BOJ said.

On the price front, the year-over-year rate of change in the consumer price index has been slightly negative. The central bank added that inflation expectations have remained in a weakening phase.

The central bank expects Japan's economy to turn to a moderate expansion, with domestic demand likely to follow an uptrend. Risks to the country's outlook include developments in the U.S. economy and the impact of its monetary policy on global financial markets and the consequences stemming from the Brexit vote, among others.

As of Dec. 19, US$1 was equivalent to ¥116.91.