TOKYO - The Bank of Japan is leaning toward keeping monetary policy steady next week as stable markets, a truce in U.S.-China trade talks and robust domestic demand give it room to save its dwindling ammunition to battle the next recession, sources said.
But the decision will be a close call. The BOJ stands ready to act if a flare-up in trade tensions or renewed fears of a disorderly Brexit jolt markets and spark an unwelcome yen spike, say sources familiar with the central bank’s thinking. If the BOJ were to ease, the most likely option would be to take short-term rates deeper into negative territory, the sources said on condition of anonymity.
Despite subsiding overseas risks, BOJ Governor Haruhiko Kuroda has signalled that the central bank has not let its guard down given lingering global uncertainties. Under a policy dubbed yield curve control , the BOJ guides short-term rates at -0.1% and the 10-year bond yield around 0%. It also buys government bonds and risky assets.
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