Why did the Bank of Japan keep rates on hold?

There tend to be few reasons for UK-based financial market operators to wait up until 3.30am in the morning (or, alternatively, to get up that early) but, for the aggressively committed, the eagerly awaited Bank of Japan base rate decision might just have been one of them. Interest has centred both on the economic justification for a second 0.25% point hike in the Official Discount Rate (to 0.5%) in just six months and the political ramifications of such a move. Make no mistake, a rate hike was always a possibility. The Bank of Japan sets the country’s base rate with regard to its perception of the inflation outlook in two years time, much as our own Bank of England is supposed to do and in that context there are ample reasons to tighten policy in the country’s fourth consecutive year of economic upswing… but the Bank held rates steady and unleashed a storm relating to its independence from political pressure.  more