While the rest of the developed economies are looking at tighter monetary policies after years of growth, the Bank of Japan is sticking to its ultra-easy policy. Consequently, investors interested in Japan may consider currency-hedged exchange traded funds to diminish potential currency risks with diverging global central bank policies.
The Federal Reserve hiked interest rates for the second time this year on Wednesday and is looking at two more rate hikes later this year while the European Central Bank on Thursday outlined plans to wind down its bond-purchasing program by the end of the year. On the other hand, the BOJ decided to maintain its loose monetary policy Friday, the Wall Street Journal reported.
“It is appropriate for Japan to patiently continue current monetary easing,” Gov. Haruhiko Kuroda said at a news conference. “The divergence of monetary policies reflects different economic and price conditions in each country.”
Japan is still struggling with low inflation, with the country’s core consumer price index, which excludes fresh food prices, up 0.7% in April year-over-year after decelerating for two consecutive months. The BOJ has maintained at 2% target.