The Bank of Japan has today dialed back emergency pandemic-funding but maintained ultra-loose policy and extended financial relief for small firms.
This cements expectations it will remain among the most dovish central banks for the foreseeable future.
The Bank of Japan's decision, underpinned by cautious optimism that the economic damage wrought by coronavirus crisis is gradually healing, came hours after Britain became the first G7 economy to hike interest rates since the onset of the Covid pandemic.
The Federal Reserve and the European Central Bank also moved towards rolling back crisis-era stimulus, though at varying degrees reflecting their differing views - as well as uncertainty - on the surge in global inflation.
Fears over the recent rapid spread of the Omicron variant of the coronavirus have also complicated the challenge for policymakers, whose monetary plans for a post-pandemic economic revival have been disturbed.
"The bigger picture is that in a week where the Fed signalled several rate hikes next year and the Norges Bank and the Bank of England raised interest rates, the Bank of Japan sounded strikingly dovish," said Marcel Thieliant, senior Japan economist at Capital Economics.
"The upshot is that the Bank of Japan will remain among the few central banks that won't tighten policy for the foreseeable future," he added.
In a widely expected decision, the Bank of Japan today maintained its short-term rate target at -0.1% and that for 10-year bond yields around 0%.
The Bank of Japan also extended by six months a March 2022 deadline for its pandemic-relief loan scheme with tweaks to conditions, to ensure commercial banks keep channeling funds to small firms.
But it decided to slow purchases of corporate bonds and commercial paper to pre-pandemic levels from April, in a nod to sharp improvements in big firms' financial conditions.
"Financial conditions in Japan have improved on the whole, despite the continued significant impact of the Covid-19 pandemic on domestic and overseas economies," the bank said.
The Bank of Japan maintained its assessment that Japan's economy was picking up as a trend, but cautioned that developments surrounding the pandemic and supply constraints have clouded the outlook.
That uncertainty, with Japan's consumer inflation stuck well below its 2% target and the economic recovery still fragile, makes it a near certain bet that the Bank of Japan will likely maintain easy monetary policy much longer than its major counterparts.
The fastest major central bank following in the footsteps of Bank of England could be the Fed, which said this week it would end its pandemic-era bond purchases in March and pave the way for three quarter-percentage-point rate hikes next year.
