Bank of Japan leaves policy unchanged as Kuroda bows out

In its final meeting before Governor Haruhiko Kuroda steps down and is succeeded by economics professor Kazuo Ueda, the Bank of Japan maintained its ultra-easy monetary policy.

Most analysts anticipated that the Bank of Japan would stick with its initial path in response to Kuroda’s final policy choice, but some had predicted a surprise change.

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The bank made no further changes to the range in which rates for 10-year government bonds vary, maintaining its long-standing negative interest rate.

The choice was made soon after Ueda, 71, was given the go-ahead by the Japanese government to assume the position of governor of the BoJ in April.

The BoJ has stubbornly resisted tightening in recent months, despite peers in other developed countries raising rates to combat inflation. This policy divergence has caused the yen to decline against the dollar.

Kuroda has insisted that the bank has not yet succeeded in achieving its long-term objective of sustained inflation of 2%, which is thought to be essential to jump-start the third-largest economy in the world.

Consumer prices increased by 4.2 percent in January due to a variety of reasons, including higher fuel prices. However, according to Kuroda, these increases are only temporary due to the conflict in Ukraine.

Before making any changes to the policy, he wants to see proof of longer-lasting increases, including pay increases.

In a statement to lawmakers last month, Ueda expressed his view that “continuation of monetary easing is suitable” and forewarned of market and economic uncertainty.

current causes of price increases “will probably diminish in the future, and consumer price inflation will probably fall below two percent,” he continued.

Ueda is a skilled communicator who favors thoughtful contemplation over hasty action. He holds a PhD in economics from the Massachusetts Institute of Technology.

On April 8, Kuroda, 78, will leave his position as head of the Bank of Japan after serving the longest-ever second term. His reign has been characterized by his infamous “bazooka” easy-money policies.

A first for a Group of Seven country, the central bank’s assets have quadrupled since he took over, exceeding gross domestic product.

Analysts predict that Ueda will have a difficult time guiding the BoJ’s future given that its easy-money policies are seen as untenable in the long run.

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