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Bank Of Japan Keeps Its Massive Stimulus Program Intact Despite The Ukraine Crisis

On Friday, the Bank of Japan warned about the rising risk of economic recovery because of the crisis in Ukraine. They have made no changes in the massive stimulus program and declared that Japan would remain an outlier in the global shift toward tighter monetary policy.

If we compare it with the Federal Reserve of the United States and the Bank of England, the BOJ’s dovish contrasts with the former. This week, the former two have raised interest rates to prevent rapidly rising inflation from becoming entrenched. Reuters reports that the Bank of Japan has informed that the Ukraine Crisis can pose a severe threat to growth, though they haven’t made any changes in the massive stimulus program.

Two-day policy meeting results

On Friday, the two-day policy meeting ended with the declaration that BOJ has kept its short-term rate target -0.1 percent and its 10-year bond yield target at around 0 percent. BOJ stated that Japan’s economy is improving. The outlook was less upbeat than in January’s previous meeting when the economy showed “clearer signs of improvement”.

Reuters reports that the impact of developments in Ukraine on Japan’s economy and prices via markets, raw material prices, and overseas economies is highly uncertain.

Views of senior economist Shiraishi

Reuters reports that the Central Bank has also warned, the Bank of Japan has informed that the Ukraine Crisis can pose a severe threat to growth, though they haven’t made any changes in the massive stimulus program. Risks might arise in front of the financial market because of the Ukraine crisis; this will be responsible for the rise in raw materials prices after this market is looking forward to hearing the thoughts of Governor Haruhiko Kuroda on the inflation outlook and the weak yen, which is pushing up already high fuel prices. The BOJ has no choice but to continue stimulus in place patiently until Kuroda’s term ends in April 2023.

While inflation is expected to approach or even exceed the BOJ’s target of 2% in the coming months, the central bank is unlikely to remove stimulus because it sees recent energy-driven price increases as a possible threat to an economy recovering from the coronavirus pandemic.