Bank of Japan concluded its meeting early today. As expected, the officials unanimously voted to keep the interest rates unchanged. According to the statement, the officials agreed to continue applying an interest rate of negative 0.1% to the policy-rate balances in the current accounts held by financial institutions. In addition, they will continue the quantitative easing program by purchasing Japanese Government Bonds (JGB) so that the yield will remain at around zero percent.

Following the statement, the Japanese Yen fell against its major global peers. This is because the officials changed the language in the official statement, removing a key phrase on the timeframe of achieving the 2 percent inflation target. This is an indication that the easy money policies by the central bank may continue for a longer period than is expected.

In addition, the officials released the economic outlook statement. In the statement, the officials said that the economy will continue to perform better than expected in 2018 as a result of an accommodative monetary policy. In 2019 and 2020, they predicted that the economy will continue to grow, supported by external growth. This growth will slow down due to a cyclical slowdown in business fixed investment and the tax increment.

They were also concerned about the current shifts in global trade where many governments, including the United States have taken on a more protectionists strategies. They were also concerned about a planned tax hike that will start in October 2019. Another source of concern was the firms’and households’ medium to long-term growth expectations might be lowered.

In recent months, the BOJ has given conflicting signals. During his address to parliament a few months ago, Hurohiko Kuroda talked about his goal to start normalizing in April next year. A while later, after the country released disappointing inflation numbers, the language on normalization changed.

As you recall, following the financial crisis of 2008/9, major central banks went on an easing program. They brought interest rates to zero – and others below zero. They also took to an unconventional strategy known as Quantitative Easing. In this program, they bought government bonds and other asset backed securities. All this was intended to promote growth. Years later, several central banks have started the normalizing process. The Fed was among the first banks to start normalizing. They ended QE and have done several gradual rate hikes.

In Europe, the ECB yesterday left rates unchanged, which was expected. They also left the policy on QE unchanged. In the statement, the officials pledged to end the QE in September. They left the options open for further asset purchases. They also talked about leaving interest rates unchanged even after the end of QE.

In the UK, the BOE had previously talked about starting hiking interest rates. However, recent data suggests that the inflation in the country is slowing, removing the urgency for rate hikes.