Bank of Japan dials back economy life support

The Bank of Japan has dialed back life support measures for the country's economy.

On Friday (December 17) it said it would slow purchases of corporate bonds and other debt.

That's after a big improvement in big firms' financial conditions.

But the bank is far from turning off support altogether.

Governor Haruhiko Kuroda explained why:

"Inflation is quite high in Europe and the United States, so they started tightening or normalising monetary policies. But in the case of our country, the inflation rate is around 0%. Even when stripping away one-off factors such as energy prices, it's still around 0.5%, way below our 2% target. Therefore, it is necessary for Japan's economy and consumer prices that we maintain the current massive monetary stimulus."

A day earlier the Bank of England became the first major central bank to raise rates since the global health crisis began.

This week also saw the U.S. Federal Reserve signal at rate hikes to come next year.

Both are more worried about rising prices than the BoJ.

That all leaves Japan's central bank as among the world's most dovish.

Friday saw it leave rates unchanged, while it also extended an emergency loan scheme to make sure banks can keep channeling money to small firms.

Economists don't expect it to tighten policy any time in the foreseeable future.

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