© Reuters. A view of signage outside Bank of Japan headquarters amid the coronavirus disease (COVID-19) outbreak in Tokyo, Japan, May 22, 2020.REUTERS/Kim Kyung-Hoon

By Leika Kihara

TOKYO (Reuters) – The Bank of Japan maintained its massive stimulus on Friday and warned of risks to a fragile economic recovery from the crisis in Ukraine, bolstering expectations that it will remain an outlier amid a global shift towards tighter monetary policy policy.

The BOJ’s subdued tone contrasts sharply with the US Federal Reserve and the Bank of England, which raised interest rates this week to prevent soaring inflation from becoming entrenched.

As widely expected, the BOJ maintained its short-term interest rate target at -0.1% and its 10-year bond yield around 0% during its two-day policy meeting that ended on Friday.

“Japan’s economy is picking up as a trend,” the BOJ said in a statement. The picture was less optimistic than that of the previous meeting in January, when it said the economy was showing “clearer signs of recovery”.

The central bank also warned of new risks from the crisis in Ukraine, which it said destabilized financial markets and pushed up commodity costs.

“There is very high uncertainty about the impact developments in Ukraine could have on the Japanese economy and prices through markets, commodity prices and overseas economies,” the statement said.

While inflation is approaching or even exceeding its 2% target in the coming months, the BOJ is in no mood to withdraw stimulus as it sees recent energy-driven price increases as temporary and a potential threat to an economy that is yet to come. just recovering from the coronavirus pandemic.

The world’s third-largest economy is likely to see growth stagnate in the current quarter as supply disruptions and COVID-19 dampened production and consumption.

During his post-meeting briefing, BOJ governor Haruhiko Kuroda is likely to emphasize his determination to continue to provide massive monetary support until the rise in inflation is coupled with strong wage growth.

Earlier in the day, data showed that Japanese core consumer prices rose 0.6% yoy in February, below the BOJ target, but the fastest pace in two years in a sign of mounting inflationary pressures from higher energy costs.

Reflecting the pain already caused by rising fuel costs for households, energy and electricity bills both rose about 20% from last year’s levels in February, the fastest pace since 1981.

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This post BOJ maintains huge stimulus, warns of growth risks of crisis in Ukraine

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