Japan central bank stands pat after Fed rate cut

TOKYO (AP) – Japan’s central bank opted yesterday to keep its monetary policy unchanged despite the growing signs of trouble that prompted the Federal Reserve to cut its benchmark rate.

The Bank of Japan (BOJ) said in its policy statement that exports, industrial output and business sentiment had been affected by the slowdown in overseas markets.

The China-United States (US) tariff war has pummeled Japan’s exports. But the BOJ said strong corporate profits were supporting business investment.

The Federal Reserve reduced its key short-term rate — which influences many consumer and business loans — by a quarter-point to a range of 1.75 per cent-two per cent on Wednesday.

Fed Chairman Jerome Powell said the US expansion appears durable but if the economy weakens another rate cut was possible.

The BOJ’s key interest rate has been at minus 0.1 per cent for years, while it has continued massive asset purchases to help inject money into the economy. So far, it has failed to attain the two per cent inflation rate target it said is needed to help sustain growth.

The bank’s statement said that “downside risks concerning overseas economies seem to be increasing” and it will monitor the situation to see if momentum toward higher inflation is failing. But given strains on banks and the potential impact on the Japanese yen it might not follow through on promises to act if necessary, Marcel Thieliant of Capital Economics said in a commentary.

File photo shows Bank of Japan Governor Haruhiko Kuroda during a meeting of the Lower House Financial Committee. PHOTO: AFP