Bank of Japan maintains ultra-low interest rates

The news: The Bank of Japan maintained ultra-low interest rates, pledging to keep supporting the economy until inflation sustainably hits its 2% target, suggesting it was in no rush to phase out its massive stimulus programme.

The numbers: As widely expected, the BOJ maintained its short-term interest rate target of -0.1% and kept the target for the 10-year bond yield at around 0% at a two-day meeting that ended on Friday. It also left unchanged an allowance band of 50 basis point set either side of the yield target, as well as a new hard cap of 1.0% adopted in July. Data released earlier on Friday showed Japan's core inflation hit 3.1% in August, staying above the central bank's 2% target for a 17th straight month in a sign of broadening price pressure in the world's third-largest economy.

The context: The BOJ's decision contrasts with those of U.S. and European central banks, which in recent meetings have signalled their resolve to keep borrowing costs high to rein in inflation. It faces various challenges in exiting former governor Haruhiko Kuroda's radical stimulus, including weak signs in the global economy and the risk of triggering a spike in yields that boost the cost of funding Japan's huge public debt.

What they said: "Japan's economy is likely to continue recovering moderately," the BOJ said in a statement announcing the decision, adding that inflation expectations have shown renewed signs of heightening.