The Bank of Japan kept interest rates steady on Tuesday and decided to decelerate the pace of its balance sheet drawdown next year, signaling its preference to move cautiously in removing remnants of its massive,

The Bank of Japan left its benchmark rate unchanged and unveiled a plan to slow its withdrawal from the bond market from next year in a sign of caution following heightened market volatility.

Japan's core consumer inflation hit a more than two-year high of 3.5% in April, well exceeding the BOJ's 2% target, due to a 7.0% surge in food prices that adds to prospects of steady wage hikes by firms faced with intensifying labour shortages.