Despite the rapid devaluation of the yen, the Bank of Japan decided on Thursday to keep its monetary policy accommodative.

The Japanese central bank is thus continuing to buck the trend of other major central banks to tighten monetary policy against the background of rising global inflation rates.

To reinforce the commitment and to allay doubts in the financial markets, the central bank announced that from now on it would buy unlimited ten-year government bonds at fixed interest rates on a daily basis.

Central bank governor Haruhiko Kuroda wants to ensure that the long-term ten-year interest rate does not rise above 0.25 percent.

Patrick Welter

Correspondent for business and politics in Japan based in Tokyo.

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After the monetary policy decision, the yen fell sharply against the US dollar and the euro after recovering somewhat in the previous days.

The euro was trading at 136.5 yen and the dollar was trading at almost 130 yen.

The devaluation of the yen in recent weeks has increasingly aroused the displeasure of the government and the population, because it means that imports of oil, gas and other commodities are becoming more expensive.

The inflation rate in Japan was recently at 0.8 percent due to special factors and is expected to be around 2 percent in the near future.

The central bank had been offering bond purchases at a fixed interest rate every day since Wednesday last week.

On Thursday, it bought government bonds worth 581.6 trillion yen (4.3 billion euros).

On Wednesday it was a record 921.5 trillion yen.

If the central bank continues to buy government bonds at this rate, it will have bought all outstanding Japanese government bonds by 2027, Capital Economics' Tom Learmouth commented on the monetary policy decision on Thursday.

The purchases in the billions show the pressure on the global financial markets for higher interest rates, which the central bank is resisting.

It confirmed on Thursday that it would like to keep the ten-year interest rate in a range of plus or minus 0.25 percent around zero.

The ten-year interest rate for US government bonds is currently around 2.8 percent.

In view of this difference, speculation persists that the Japanese central bank will no longer be able to maintain its monetary policy if the US Federal Reserve and other central banks continue to raise interest rates.

Observers such as Learmouth or Frederic Neumann from HSBC believe it is possible that the Japanese central bank will widen the band around the zero interest rate in the coming months.

In fact, that would be a departure from the expansive monetary policy of yield curve control,

The central bank justifies its adherence to the expansive monetary policy by saying that the increase in inflation is only temporary.

On Thursday, the bank forecast inflation averaging about 1.9 percent this fiscal year, falling to 1.1 percent in the next two years.

This means that the central bank's medium-term inflation target of 2 percent would not be reached.

The bank again promised on Thursday that it would maintain its expansive monetary policy until the inflation rate reached 2 percent or more on a permanent basis.

The bank expects economic growth of around 3.8 percent in the current fiscal year and a weakening to around 1.1 percent in the following years.

The central bank reiterated its readiness to further ease monetary policy should this prove necessary.

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