Photo/Illutration The Bank of Japan headquarters in Tokyo’s Chuo Ward (Asahi Shimbun file photo)

The Bank of Japan kept monetary policy steady on Wednesday but offered a bleaker view on exports and output, reinforcing expectations the bank will maintain its massive stimulus even as major counterparts eye a withdrawal of crisis-mode support.

As widely expected, the BOJ maintained its short-term interest rate target at -0.1 percent and that for 10-year bond yields around 0 percent.

“Exports and factory output continue to increase, although they are partly affected by supply constraints,” the BOJ said in a statement announcing the decision, nodding to the fallout on Japanese manufactures from Asian factory shutdowns caused by the coronavirus pandemic.

The BOJ maintained its assessment on the economy, saying it was “picking up as a trend, although it remained in a severe state due to the impact of the pandemic.”

The rate review came ahead of a ruling party leadership race on Sept. 29 that may shift the administration’s focus away from the current stance based on former premier Shinzo Abe’s “Abenomics” reflationist policies, analysts say.

While the candidates agree on the need to maintain massive monetary support for now, they vary on the preferred long-term policy path, an area Governor Haruhiko Kuroda may be grilled on at his post-meeting briefing.

Japan’s economy emerged from last year’s doldrums thanks to robust global demand, though extended state of emergency curbs to combat the COVID-19 pandemic have weighed on consumption.

Core consumer prices fell 0.2 percent in July from a year earlier to mark the 12th straight month of declines, as weak consumption discouraged firms from passing on rising raw material costs to households.

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