Japan kept low interest rates.

The Bank of Japan kept ultra-low interest rates on Friday. It maintained its dovish guidance, cementing its status as an outlier among global central banks tightening monetary policy as recession fears dampen prospects for a solid recovery. The central bank also announced plans to increase the frequency of its bond-buying next month, doubling down on efforts to defend its ultra-loose monetary policy. BOJ Governor Haruhiko Kuroda said Japan was progressing toward achieving its 2% inflation target, as rising prices heighten the chance more firms will increase wages next year. But he said the central bank was near raising interest rates, with inflation likely falling short of its 2% target for years to come.

«We expect wages to rise reflecting recent inflation gradually,» Kuroda told a news conference. «For now, we don't expect inflation to stably and sustainably achieve 2% inflation next fiscal year». The yen fell against the dollar after the BOJ's decision and extended its losses to hit a session high of 147.36 on Kuroda's dovish comments. However, Kuroda brushed aside the view the BOJ's yield cap was to blame for the yen's recent sharp declines, reinforcing expectations he won't use rate hikes as a tool to slow the currency's falls.

In fresh quarterly projections, the BOJ revised its core consumer inflation forecast to 2.9% for the year ending in March 2023. That is higher than a 2.3% estimate in July and well above the central bank's 2% target. The BOJ also upgraded its inflation forecasts to 1.6% for both fiscal 2023 and 2024, in a nod to recent evidence that companies are actively passing on rising raw material costs to households. «Our new price forecasts have put increased weight on the chance Japan will see higher inflation accompanied by wage hikes,» Kuroda said.

The BOJ's announcement came in the wake of the European Central Bank's decision to raise interest rates on Thursday, continuing its efforts to prevent rapid price growth from becoming entrenched.

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