BOJ keeps monetary policy steady, looks for more effective ways to achieve inflation target

The Bank of Japan, as widely expected, kept policy steady and extended by six months an array of measures aimed to support companies hit by pandemic, on its December’s policy meeting.

Renewed spike in Covid-19 infections signal that downward pressures on the economy and prices are expected to persist for extended period and prompted the central bank to probe more effective measures to achieve its 2% inflation target.

The central bank’s governor Kuroda said that there will be no change to BOJ’s commitment to achieve 2% inflation target and that BOJ will maintain ultra-loose monetary policy until inflation exceeds 2%.

The policymakers remain concerned about the diminishing return and rising cost of prolonged easing as ultra-low rates hit bank’s profits, but since the pandemic continues to hurt the economy, BOJ needed to stay in line with steps of other major central and extend fund aid program by further six months.

The package includes increased purchases of corporate debt and a lending scheme to distribute money via banks to small firms and Bank of Japan said it is ready to extend the deadline of the package further if needed to support the economy.

The Bank of Japan and other major central banks continue to use all available policy tools in fighting a prolonged environment of low growth and low inflation as new wave of Covid-19 infections hurt the global economic rebound from pandemic.