The Japanese central bank kept interest rates unchanged on Tuesday, but upgraded its assessment of the country’s economy.
The central bank kept interest rates at their current low of 0.1 percent, leaving the the 10-year Japanese government bond yield target at around zero.
However, the central bank boosted investor sentiment by improving its outlook on the economy for 2017.
Despite inflation remaining well below the government’s 2 percent target, the Bank of Japan pointed towards its large public expenditure programme set to support economic growth throughout 2017. Rising domestic demand and growing exports were “likely to turn to a moderate expansion”.
Governor Haruhiko Kuroda said at a press conference on Tuesday that the upgrade reflected an increase in imports and exports, as well as favourable currency movements.
“The premium of US benchmark rates over comparable Japanese rates is set to favour a significantly weaker yen over the next several quarters than prevailed in most of 2016,” said Bill Adams, senior international economist at PNC in Pittsburgh told the Financial Times.
“Until Japan shows signs of a sustained and self-reinforcing cycle of rising wages and consumer prices, the Bank of Japan will leave policy in its current, highly expansionary stance,” he added.