BOJ takes steps to make policy flexible but vows to keep rates low

The Bank of Japan took measures to make its massive stimulus program more flexible and pledged to keep interest rates low for the time being on Tuesday, reflecting its forecast that it would take time for inflation to hit its 2 percent target.

The decision underscored the challenges the BOJ faces as stubbornly weak inflation forces it to maintain a massive stimulus program despite the rising costs of prolonged easing.

The changes indicate that while Governor Haruhiko Kuroda plans on keeping radical stimulus program in place for now, he is looking at the impact the policies are having on other parts of the economy, such as the financial markets and banking system.

Ahead of the policy announcement, market speculation had grown that the central bank might raise the prospect of an interest rate rise – the absence of any such action or guidance on Tuesday drove a decline in bond yields and helped stocks claw back earlier losses.