The Bank of Japan left rates unchanged Friday, in line with market expectations and against the backdrop of a yen rally that is starting to cause some concern.
The central bank kept the uncollateralized overnight call rate steady at 0.25% following a two-day meeting of its Policy Board.
According to polls ahead of the decision, analysts were in agreement that the BOJ would choose not to make any rate adjustments.
The market will be looking for any signals about the future direction of rates when Gov. Kazuo Ueda speaks at a news conference later Friday.
Japan’s benchmark index, the 225-issue Nikkei stock average, gained around 2% during morning trading while the yen was trading at around ¥142 to the dollar.
The Japanese currency has strengthened dramatically in recent months, going from above ¥160 to the dollar in early July to below ¥140 earlier this week.
The BOJ is technically independent, but its policy path could be influenced by the country’s next leader, especially if economic security minister Sanae Takaichi wins the ruling Liberal Democratic Party’s presidential election. The winner of the Sept. 27 vote is likely to become prime minister.
Takaichi has stated that Japan should maintain a dovish monetary policy, since underlying inflation is still low.