(Reuters) - The Bank of Japan retained its easy monetary policy settings on Thursday and projected inflation at well below its 2% target for at least two more years, reinforcing market bets it will lag other central banks in dialling back crisis-mode policies.
As widely expected, the BOJ maintained its target for short-term interest rates at -0.1% and that for 10-year bond yields around 0% at the two-day rate review that ended on Thursday.
In fresh quarterly estimates, the BOJ cut its consumer inflation forecast for the year ending in March 2022 to 0% from 0.6% due largely to the impact of cellphone fee cuts and a change in the base year for the price index.
Following are excerpts from BOJ Governor Haruhiko Kuroda's comments at his post-meeting news conference, which was conducted in Japanese, as translated by Reuters:
CURRENCY MOVEMENT
"The yen's decline affects Japan's economy in various ways. But I don't think the yen's recent slight decline is bad for Japan's economy. It helps boost the yen-based profits Japanese companies earn overseas. What's important is for currency rates to move stably reflecting economic fundamentals."
"If all things are equal, it's true a widening interest-rate differential between Japan and other countries would weaken the yen as the BOJ has yield curve control in place. But it's not clear whether this will indeed happen."
"The chance of YCC pushing down the yen further, through widening interest-rate differentials, isn't that big."
"The yen's recent weakening, as a whole, is definitely positive for Japan's economy. It's good for exports and lifts the yen-based profits firms earn overseas. It more than offsets the negative impact from rising import costs. That's not to say a weak yen is always good for the economy. I'm saying that under current economic and price conditions, a weak yen is definitely positive for the economy."
REAL, EFFECTIVE RATE
"At present, currency rates are moving in line with fundamentals. It's true the yen has weakened somewhat. But I don't think the moves deviate from fundamentals. I therefore see no problems with the moves."
"There's no pre-set norm on the desirable level of real, effective exchange rates. I won't comment on specific levels."
PANDEMIC RELIEF
"We have not made any decision yet We must look carefully at developments over the pandemic and the impact on corporate finance."
SUBDUED INFLATION
"For one, the recovery in demand has been weak compared with western economies. Another factor is that Japanese firms retained jobs even when the pandemic hit. That meant they were able to maintain price and wage levels when demand picked up."