The Bank of Japan raised its inflation forecast at Thursday’s meeting, but left its extremely low interest rates unchanged and warned of risks to the outlook for the economy. That means it will remain the black sheep among key central banks tightening monetary policy.

The BoJ lowered its GDP growth forecast and raised its inflation forecast. As expected, the Bank of Japan left the short-term interest rate at -0.1% and the yield target for 10-year government bonds at about 0%. Eight of the nine board members voted in favor of the decision.

The bank also raised its core inflation forecast for the current fiscal year ending March 2023 to 2.3% from 1.9% and for the next fiscal year to 1.4% from 1.1%. The bank lowered its GDP growth forecast for this fiscal year to 2.4% from 2.9%.

“It’s important that companies, whose profits have risen because of the weakening yen, increase capital investment and raise wages. This will reinforce the positive cycle in which rising profits lead to higher spending. With the rapid exchange rate changes that we are witnessing now, companies may be wary of making capital investments. Therefore a sharp weakening of the yen is undesirable. We will work closely with the government to monitor closely the dynamics of currencies and their impact on the economy,” said Bank of Japan Governor Haruhiko Kuroda at a press conference following the meeting.

Japan revealed the “disastrous” consequences of the sanctions battle.

“We expect companies to continue to pass on (rising) costs to consumers…It should be noted that short-term inflation expectations have strengthened quite noticeably, and they are also strengthening over the medium and long term. Nevertheless, we do not expect core inflation to reach 2% immediately,” he added.

“We have no plans to raise bond yield targets. Nor do we plan to widen the range of deviations from target yield levels. The economy is in the middle of a recovery from the effects of the pandemic. Japan’s deteriorating terms of trade are also draining profits, adding to the pressure on the economy. Therefore, we must continue to pursue a loose monetary policy to ensure that corporate profits rise to moderate wage and price growth,” Kuroda summarized.