UPDATE - Japan keeps record-low rates, expands yield curve control range

UPDATES WITH CENTRAL BANK GOVERNOR'S REMARKS

By Tuba Sahin

ANKARA (AA) – Japan's central bank on Tuesday kept its benchmark rate at a record low as expected, but expanded the range for yield fluctuations in the benchmark government bonds, surprising markets.

The Bank of Japan held its key short-term interest rate unchanged at -0.1% and 10-year bond yields at around 0% in its December meeting.

The bank increased the 10-year Japanese government bond yield fluctuations to a range of -0.5% and 0.5%, from between -0.25% and 0.25%.

The bank stressed that it will continue widening the monetary base to achieve an annual inflation target of 2%.

According to the latest data, Japan's annual consumer inflation rate rose to 3.7% in October, the highest since January 1991.

Following the move, the Japanese yen gained more than 2% to 133 per dollar, its highest level in four months.

Speaking at a news conference after the two-day policy meeting, Bank of Japan Governor Haruhiko Kuroda said the bank's move to widen the trading band for long-term Japanese government bond yields should not be taken as a rate hike.

"Today's step is aimed at improving market functions, thereby helping enhance the effect of our monetary easing. It is therefore not a rate hike," he said.

Kuroda stressed that it was "too early" to discuss an exit from the easing framework as the inflation was far above the target of 2%.