By adding vague new language to its latest policy statement, the Bank of Japan is hoping to keep unwanted sharp gains in the Yen in check, without having to its depleted policy tool-kit or tying its hands on monetary action.
In a statement announcing its decision to keep policy steady, the Bank of Japan prompted some head scratching by saying it would “re-examine” economic developments at next month’s rate review.
Particularly, it said that “closer attention” would be needed to the possibility that the economy could lose momentum to hit its 2% inflation target.
Some market watcher thought it could be a pre-commitment to ramp up stimulus at the Bank of Japan’s rate meeting on October 30 and 31, but officials who are familiar with the central bank’s thinking say it may be more a case of a central bank with limited options trying to buy time.
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