BoJ defies market pressure and holds yield target

In the Japanese sharemarket, Olympus advanced 4.7 per cent and Mitsubishi Motors 4.6 per cent.

“While the end point seems clear, the path is not,” said Commonwealth Bank chief economist Stephen Halmarick, with a nod to the succession puzzle at the central bank.

Mr Kuroda’s term expires on April 8, and “at present there is no obvious [or willing] candidate to take this critical role,” Mr Halmarick said.

Meanwhile, the terms of the two deputy governors expire on March 19, and the BoJ meets next on March 9.

“Alternatively, governor Kuroda may like to go out with a bang – declaring victory on achieving Japan’s 2 per cent inflation target, and ending the long‑running [yield curve control] and [negative interest rate] ultra‑easing monetary policy regime just before he leaves the BoJ,” Mr Halmarick said.

The Tokyo consumer price index, to be released on January 27 and March 3, “could be critical inputs into the BoJ’s policy decision”.

The BoJ remains an outlier in a world where central banks in advanced economies have been raising interest rates in chaotic fashion to try and bring inflation down to target.

As part of Wednesday’s policy decider, its updated forecasts project the Japanese consumer price index, excluding fresh food, to be below the 2 per cent target in financial years 2023 (1.6 per cent) and 2024 (1.8 per cent). The Japanese fiscal year ends in March.

Inflation is presently 3.5 per cent to 4 per cent.

“It is expected in the baseline scenario that inflation rates around the world will decline gradually and that overseas economies will continue to grow moderately, albeit at a decelerating pace,” the policy materials said.

“That said, vigilance against a wage-price spiral has remained high, mainly in advanced economies.”

The central bank bought about 3 trillion yen ($33 billion) of government bonds over Monday and Tuesday, according to Bloomberg.

Mr Kuroda said there was no case to widen the band of tolerance for the 10-year bond, and he does not expect to see yields exceed the 0.5 per cent level.

He added that the BoJ’s goal of inflation sustainably at 2 per cent was not yet in sight.