By Leika Kihara

TOKYO (Reuters).-The Bank of Japan continued its enormous stimulus Friday, warning of possible risks to a fragile economy recovery from Ukraine’s crisis. These comments reinforce expectations that Japan will continue to be an anomaly amid a worldwide shift toward tighter monetary policy.

Contrary to the dovish tone of the BOJ, the U.S. Federal Reserve (BoE) raised interest rates last week in an effort to prevent fast-rising inflation from becoming entrenched.

The BOJ kept its short-term target rate at -0.1%, and the yield for 10-year bonds at around 0% as per the consensus of the public. This was at the end of the BOJ’s two-day policy meeting on Friday.

The BOJ stated in a statement that Japan’s economy was showing a “trend” of recovery. This view is less optimistic than the January meeting, which saw the BOJ state that the economy showed “clearer signs” of picking up.

The Ukraine crisis was also a source of concern for the central bank, it warned about new threats and said that they were destabilizing financial markets as well as sharply increasing raw material costs.

The statement stated that there was “very high uncertainty” about the effects of developments in Ukraine on Japan’s economy, prices via the markets, raw materials prices and other economies.

Inflation is expected to approach or exceed 2% in the coming months. The BOJ however, isn’t in the mood to withhold stimulus. It sees recent energy-driven price increases as temporary and possible threats to an economy that is just recovering from the coronavirus epidemic.

It is likely that the world’s third largest economy saw its growth slow in Q3 as supply disruptions and COVID-19 curbs hampered output and consumption.

BOJ Governor Haruhikokuroda will likely stress that he is determined to maintain huge monetary support up to the point where inflation rises with strong wage growth.

Data from Japan showed that core consumer prices increased 0.6% in February. This was below the BOJ target, but the highest pace since 2002, a clear sign of rising inflationary pressures due to higher energy costs.

A sign of how much rising fuel costs are already making households miserable, both energy and electric bills jumped by about 20% in February, compared to year-ago levels. It is also the fastest rate increase since 1981.