The Bank of Japan has held off from expanding monetary stimulus as it takes a wait and see approach to scrutinise the effects of its existing policies.
The move surprised the market with the yen surging against the dollar and Japan’s Nikkei dropping 3.6 per cent.
Bank of Japan governor Haruhiko Kuroda said there were strong risks on the outlook for Japan’s economy and prices, adding that the central bank “won’t hesitate” to take additional monetary easing steps.
The bank estimates it will hit its 2 per cent price target in March 2018, six months later than its previous forecasts.
The Bank of Japan caught investors off guard in January when it introduced negative interest rates. Five board members voted against the -0.1 per cent interest rate.