(Reuters) – The Bank of Japan maintained its relaxed monetary policy settings Thursday. They projected that inflation would be well below 2% for at least two additional years. This reinforces market expectations it will trail other central banks when dialing back crisis-mode policies.

The BOJ kept its short-term target interest rate at -0.1%, and the 10-year yield at around 0% as per the widely anticipated rate review. This was at the end of the two-day rate review on Thursday.

The BOJ has reduced its forecast of consumer inflation for March 2022 from 0.6% to 0% in quarterly estimates. This is largely due to the effect of cell phone fee reductions and changes in the base year.

Below are extracts of Haruhiko Kuroda, BOJ Governor,’s remarks at his post-meeting press conference. These were translated by Reuters.

CURRENCY MOVEMENT

The yen’s fall has many negative effects on Japan’s economy. However, I do not believe that Japan’s recent minor decline in the yen is a bad thing for its economy. The yen-based profits Japanese businesses earn abroad are boosted by it. Important is that the currency rates move in a stable manner, reflecting fundamental economic factors.

If all other things were equal, then it is true that a wider interest rate differential between Japan (and other countries) would lead to a weakening of the yen. The BOJ maintains yield curve control. It’s unclear if this will happen.

“YCC has a small chance of pushing the yen down further by widening interest rate differentials.

The recent weakness of the yen is a positive sign for Japan’s economy. Exports benefit and firms abroad earn more yen-based profits. The negative effects of rising import prices are more than offset by it. However, a weaker yen does not always make the economy better. Under current economic and price conditions, I believe a weakening of the yen will be positive for the economy.

EFFECTIVE REAL Rate

At the moment, currencies rates move in accordance with fundamentals. Yes, the yen has suffered some weakness. However, I do not believe the fundamentals are being compromised by these moves. The moves are fine to me.

“There isn’t a predetermined norm for what level would be deemed to be the most effective and real currency rates. “I won’t comment about specific levels.”

PANDEMIC RELIEF

“We are still waiting for a decision. We need to carefully examine the developments in the pandemic as well as the implications on corporate finance.

SUBDUED INFLATION

For one, recovery of demand was weaker than in western economies. The second is the fact that Japanese businesses retained employment even during the pandemic. They were therefore able to retain their wage and price levels even as demand increased.”