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The Bank of Japan kept interest rates unchanged at its September meeting as the threat of a global trade war looms over the country’s exports.

It marks the 32nd month without a substantive change to the country’s programme of asset purchases, highlighting the divergence between monetary easing in Japan and tightening in the US.

The policy decision suggests the BoJ will stay on hold until after a consumption tax rise scheduled for autumn 2019 as it observes the reaction to a policy modification it made in July.

“Japan’s economy is likely to continue its moderate expansion,” said the BoJ’s policy board in a statement. “Domestic demand is likely to follow an uptrend, with a virtuous cycle from income to spending being maintained in both the corporate and household sectors.”

The central bank warned of risks to the outlook including US macroeconomic policies, the consequences of protectionist moves and the impact of US policy on emerging markets.

The BoJ kept its short-term interest rate target at minus 0.1 per cent and its annual goal for government bond purchases at ¥80tn ($712bn) per year. It voted for the policy decision by a majority of 7-2.

In August, the central bank tweaked its easing programme to let the 10-year Japanese government bond yield move by 0.2 percentage points in either direction from zero, double the previous level.

Investors continue to debate the significance of that change, although in practice, yields have largely traded just above the 0.1 per cent level.

Officials at the central bank describe the change as an attempt to improve the functionality and liquidity of financial markets during a long period of ultra-low rates. Allowing more volatility and a slightly steeper yield curve will boost bank profits.

Some officials concede that it amounts to a de facto tightening of policy, taking advantage of an opportunity before next year’s rise in consumption tax from 8 to 10 per cent, which is expected to dampen economic activity in Japan.

The BoJ was worried that its move might be interpreted as the start of a tightening cycle in monetary policy but the muted reaction from the yield curve and the yen has eased those concerns.

Nonetheless, the central bank is likely to resist if there is a sharp move to test the 0.2 per cent upper limit on 10-year bond yields, preferring to see gentler movements within the new range.

Haruhiko Kuroda, the BoJ governor, will give a press conference at 3.30pm in Tokyo.

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