Japan’s central bank has vowed to fight deflation as it announced interest rates would remain at 0.1%.“It is a critical challenge for Japan’s economy to overcome deflation,” the bank said in a statement.
It added it “would not tolerate” annual price rises at, or below, zero. The consumer price index fell at an annual rate of 2.2% in October.
The central bank promised to keep interest rates low but did not specify how it planned to tackle deflation.
“It seems the Bank of Japan wanted to get zero out of their price understanding. They’re trying to show that they are going all out to stop deflation,” said Adrian Foster from Rabobank International in Hong Kong.
Japan’s economic recovery is not looking as strong as first thought. Earlier this month the government agreed a 7.2 trillion yen ($81bn; £48bn) stimulus plan to prevent the country’s economy from slipping back into recession.
While most other major central banks are beginning to roll back their special measures to boost the economy, the Bank of Japan recently announced plans to expand it.
Earlier this month the central bank said it would inject 10 trillion yen ($114bn; £70bn) into the economy by offering banks cheap short-term loans, in order to encourage banks to lend more.