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The Bank of Japan kept monetary policy on hold and offered no hint of future rate rises as it battles to reach an inflation objective of 2 per cent.

Short-term interest rates will stay at minus 0.1 per cent, ten-year bond yields will be capped near zero, and asset purchases remain at about ¥80trn a year as the BoJ pursues one of the world’s most aggressive monetary policies.

Japan’s decision to hold rates even as the US Federal Reserve hikes them to a range of 0.75 to 1 per cent highlights the global divergence among central banks, with the US farthest along the path to an exit from easy monetary policy.

It also throws the spotlight on Japan’s ongoing struggle to escape from deflation and suggests a change of course is unlikely during 2017.

Copyright The Financial Times Limited 2017. All rights reserved.
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