BoJ kept monetary policy unchanged today as widely expected. Short term interest rate is held at -0.1%. The central bank will continue to buy JGBs to keep 10-year yield at around zero percent. But yields are allowed to move upwards and downwards to some extent. Annual pace of monetary expansion is kept at around JPY 80T. Goushi Kataoka and Yutaka Harada dissented again in 7-2 vote.

BoJ continues to expect the economy to continue its “moderate expansion”. However, it noted that the economy is “being affected by the slowdown in overseas economies for the time being”. In particular, exports are projected to “show some weakness” for the time being. CPI is still “likely to increase gradually toward 2 percent”.

Full BoJ statement here.

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Separately, Japanese Finance Minister Taro Aso warned BoJ against insisting on the 2% inflation target. He said “things could go wrong if insist too much on achieving the 2 percent inflation target”. Earlier in the week, he said “no one in the public would be angry even if the inflation target isn’t achieved.”

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