The Bank of Japan is widely expected to keep interest rates stable at the end of its two-day meeting ending June 14, 2024. Seen here: The Japanese flag flies high at the BOJ headquarters in Tokyo.
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The Bank of Japan left its key interest rate unchanged on Friday but indicated it was considering reducing its purchases of Japanese government bonds.
As widely expected, the central bank left short-term interest rates unchanged between 0% and 0.1% at the end of its two-day policy meeting.
Notably, however, the bank said in its statement that it may reduce its purchases of Japanese government bonds after the next monetary policy meeting, scheduled for July 30-31.
The decision was made by a majority of 8-1, with board member Nakamura Toyoaki dissenting.
Toyoaki supported a reduction in JGB purchases, but believes the BOJ should only decide on a reduction after reassessing the development of economic activity and prices in the July 2024 forecast report, scheduled for July 31.
Ahead of the next meeting, the BOJ said it would seek market participants’ views and decide on a detailed plan to reduce its purchase amount over the next one to two years.
Purchases of JGBs, commercial papers and corporate bonds will also continue as decided at the monetary policy meeting in March.
Following the BOJ’s decision, the Japanese yen weakened 0.52% to 157.84 against the U.S. dollar, while the yield rose 10 year old JGB fell 44 basis points to 0.924.
The benchmark Nikkei 225 rose 0.68%, erasing earlier losses, while the Topix gained 0.71%.
Bold political steps
In March, the BOJ raised interest rates for the first time in 17 years – ending the world’s last negative interest rate regime – and scrapped yield curve control policies in a radical policy move.
However, the central bank said at the time that it would continue to buy Japanese government bonds at a pace of about 6 trillion yen ($38.17 billion) per month.
According to a June 13 note from consulting firm Teneo, large-scale purchases of Japanese government bonds helped 10-year Japanese government bond yields stabilize at around 1%, but indirectly put additional downward pressure on the weak yen.
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According to a Reuters report, BOJ Governor Kazuo Ueda said on May 8 that the central bank would closely examine recent yen devaluations to guide monetary policy.
It came after that yen The US dollar fell to a 34-year low and traded at 160 against the greenback in late April, prompting the BOJ to intervene to support the currency.
“A sharp, unilateral decline in the yen is negative for the economy and therefore undesirable” because it makes it difficult for companies to draw up business plans, Ueda told parliament.
“If currency volatility impacts or threatens to impact trend inflation, the BOJ must respond with its monetary policy,” he added.
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2024-06-14 06:04:40
www.cnbc.com
