TOKYO -- The Bank of Japan continued to buck the global trend of monetary tightening to fight rising inflation, keeping its own policy ultraloose even as the yen nose-dives against the dollar.
The Japanese currency slid to a 24-year low against the greenback this week as the interest rate gap between Japan and the U.S. continues to widen. The yen's fall has fueled concern that the BOJ's position is exacerbating inflation and hurting the economy, rather than giving it a lift with low rates.
Ahead of Friday's decision, the yield on Japan's 10-year government bonds hit a six-year high, rising to 0.265% in early trading and putting it above the central bank's yield-curve control policy that seeks a cap of 0.25%.
After a two-day policy meeting, the BOJ decided to leave its main monetary levers unchanged, including guiding short-term interest rates to minus 0.1% and long-term rates to around zero. The central bank is also maintaining its purchases of government bonds and equities.
The decision to stand pat was widely anticipated, as BOJ Gov. Haruhiko Kuroda said as recently as Monday that he intends to patiently implement the easy monetary policy to stimulate the economy and achieve the stable 2% inflation that remains elusive in Japan.
The country's core consumer price index, which excludes fresh food items, rose in April above the BOJ's goal to 2.1% from a year earlier. Including fresh food, inflation was 2.5%.
Prime Minister Fumio Kishida's government faces an upper house election on July 10. The support rating for Kishida remains high, but it has recently taken a hit, with public discontent growing over the weak yen and inflation.
By keeping its monetary stance so easy, the BOJ could exacerbate the yen's slide, as investors shift money out of Japan to other countries where they can expect better yields.
The Nikkei Stock Average plummeted more than 700 points on Friday from the previous day's close, down nearly 2.7% at one point. Major stocks, including Toyota Motor and SoftBank Group, were trading lower.
On Thursday, The Bank of England decided to raise interest rates for the fifth consecutive meeting, while the Swiss National Bank raised its policy rate for the first time in 15 years, to minus 0.25% from minus 0.75%.
Other central banks have been tightening monetary policy as they try to dowse inflation. In the U.S., the Federal Reserve raised its key rate by 75 basis points on Wednesday, as consumer inflation runs at a 40-year high of 8.6%. The European Central Bank also decided to raise interest rates next month.