Moving against global tide, BOJ set to keep ultra-low rates, dovish guidance

div classBodysc17zpet90 cdBBJodivpBy Leika Kiharap

pTOKYO Reuters – The Bank of Japan is set to maintain ultralow interest rates on Thursday and warn of heightening risks to the economy from soaring raw material costs, signalling its resolve to focus on boosting growth with massive monetary stimulus.pdivdivdiv classBodysc17zpet90 cdBBJodiv

pThe BOJ‘s commitment to its zerorate programme puts it at odds with major economies that are shifting toward tighter monetary policy, although inflation in Japan is expected to creep up towards the central bank’s 2 target.p

pIn quarterly forecasts due after the twoday meeting ending on Thursday, the BOJ will likely project core consumer inflation to accelerate near 2 in the fiscal year ending in March 2023, sources have told Reuters.p

pThe central bank is also likely to make no major changes to its dovish guidance that pledges to ramp up stimulus if needed, and keep interest rates at current or lower levels.p

p“An expected rise in Japan‘s inflation rate will be mainly driven by rising costs and therefore unsustainable. There’s no problem with maintaining monetary easing,” BOJ Governor Haruhiko Kuroda said in a speech last week.p

pSpeculation has been rife the BOJ could allow longterm rates to rise more or tweak its dovish policy guidance to combat yen declines, as some lawmakers fret further falls in the currency could hurt the economy by inflating import costs.p

pBut Prime Minister Fumio Kishida said on Tuesday he hoped the BOJ will continue with its efforts to achieve 2 inflation, suggesting the government wont pressure the bank into hiking rates to stem yen falls.p

pMarkets will focus on Kurodas remarks at his postmeeting briefing for clues on whether and how soon the BOJ could modify its dovish policy guidance.p

pJapans economic growth likely stalled in the first quarter and is seen only rebounding modestly in AprilJune, as caution over the pandemic and rising living costs hurt consumption.p

pCore consumer inflation, which hit 0.8 in March, is set to accelerate to around 2 from April, though the rise will be driven largely by rising fuel costs and the dissipating effect of past cellphone fee cuts – rather than from higher wages, or underlying demand.