BOJ maintains ultra-low rates, warns against sharp declines in yen

TOKYO: The Bank of Japan maintained ultra-low interest rates on Friday and vowed to defend its cap on bond yields with unlimited buying, bucking a global wave of monetary tightening in a show of resolve to focus on supporting a tepid economic recovery, Reuters reported.

The yen fell as much as 1.9 per cent and bond yields fell after the decision, which was widely expected but disappointed some market players who speculated the BOJ could give into market forces and tweak its yield cap

policy.

However, in a nod to the hit that the yen's recent sharp declines may have on the economy, the Bank of Japan said it must "closely watch" the impact exchange-rate moves could have on the economy.

"Recent rapid falls in the yen heighten uncertainty on the outlook and make it difficult for companies to set business plans. It's therefore negative for the economy and undesirable," Bank of Japan Governor Haruhiko Kuroda told a news conference.

At the two-day policy meeting that ended on Friday, the BOJ maintained its -0.1 per cent target for short-term rates and its pledge to guide the 10-year yield around 0 per cent by an 8-1 vote.

The central bank also stuck to its guidance to keep rates at "present or low" levels, and ramped up a programme to buy an unlimited sum of 10-year government bonds at 0.25 per cent.