The Bank of Japan has kept its monetary policy unchanged on Tuesday. However, it expressed a more pessimistic assessment of the economy and warned of a weakening of inflationary expectations, signaling that the global constraints can lead to increased incentives.
The central bank also decided to release from the newly introduced negative interest rate $ 90 billion of short-term funds, which, as the securities market participants warned, can go to the bank deposits.
As expected, the Bank of Japan kept the rate of growth in the monetary base in the range of 80 trillion yen per year ($ 700 billion). The regulator also left interest rates at negative level - minus 0.1 %.
"The Japanese economy continues a moderate recovery", - said the Bank of Japan, warning that the increase in exports has slowed due to the weakening of growth, mainly in emerging markets.
This assessment was gloomier than in January, when the Central Bank said that the economy continued its moderate recovery through export enhancement.
The Bank of Japan also worsened the assessment of inflationary expectations, saying that they "began to weaken," thus acknowledging that one of the key elements of its ambitious program of incentive measures does not meet the expectations.
The chief of the regulator, Haruhiko Kuroda, will likely try to defend the unpopular policy of negative interest rates at a press conference, scheduled today.
The Bank of Japan unexpectedly set the key rate at minus 0.1 % at the end of January, shocking investors with another bold maneuver aimed at reviving the country's economy in the face of market volatility and the slowdown in global growth.
As of the Japanese stock market, it closed lower on Tuesday, because of the Bank of Japan decision.
The Nikkei fell 1.1 % shortly after the event. However, by the end of the session, the key Japanese index managed to recover some of the lost positions and finished the day lower by 0.7 % to 17 117.07 points.
Shares of Toyota Motor Corp (T: 7203) fell 1.8 % and Panasonic Corp - by 1.4 %.