BOJ keeps policy rate steady

The Bank Of Japan (BOJ) held off on expanding stimulus on Tuesday despite once again pushing back the timing for hitting its inflation target.

The bank signalling that it will keep policy unchanged unless a severe shock threatens to derail a fragile economic recovery.

The BOJ maintained its view that the world`s third-largest economy will expand moderately as exports and consumption emerge from the doldrums.

But it also warned that risks to the outlook were skewed to the downside and that price momentum was weakening, an unusually bleak assessment that underscored its waning conviction of achieving the elusive inflation target.

"Such a strong emphasis on downside risks is highly unusual, and suggests that the Bank retains an easing bias," said Marcel Thieliant, senior Japan economist at Capital Economics.

In a quarterly review of its forecasts released alongside its policy decision, the BOJ pushed back the timing for hitting 2.0 per cent inflation to "around fiscal 2018" - admitting that the target won`t be achieved before Governor Haruhiko Kuroda`s tenure ends in April 2018.

In July, it had said inflation will hit 2.0 per cent during the fiscal year 2017, which ends in March 2018.

The central bank also cut its inflation forecasts for fiscal 2017 and 2018, blaming weak overseas demand and waning public conviction that prices and economic activity will pick up.

In a widely expected move, however, the BOJ maintained its minus 0.1 per cent short-term interest rate target and a pledge to guide 10-year government bond yields at around zero per cent.

While no longer an official target, the BOJ also kept a pledge to buy bonds at the current pace so its holdings rise at an annual pace of 80 trillion yen (625 billion pounds).

In the quarterly report, the BOJ warned that global uncertainties could discourage companies from raising wages, which in turn would boost consumption and prices, according to a news agency report.