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The Bank of Japan, in its recent monetary policy review meeting, has decided to keep its key short-term interest rate unchanged at -0.1% and continue with its yield curve control strategy for 10-year government bonds.
The central bank also maintained a 1.0% upper band for long-term government bond yield.
The decision by the Bank of Japan represents a stark contrast to the actions of other central banks around the world, which are raising interest rates in response to inflationary pressures.
In its quarterly outlook report, the Bank of Japan has revised down its Consumer Price Index (CPI) readings for FY 2024 to 2.4%, from the previous estimate of 2.8% in October. This adjustment reflects the recent decline in oil prices. Looking ahead to 2025, the board now expects core inflation to reach 1.8%, slightly higher than the earlier estimate of 1.7%.
Regarding economic growth, policymakers at the Bank of Japan have adjusted their 2023 GDP growth forecast to 1.8%, down from the earlier projection of 2.0%. For FY 2024, the bank has raised its GDP outlook to 1.2% from 1.0%, driven by pent-up demand. Governor Kazuo Ueda has indicated that there is no immediate need to change the Bank’s dovish stance.
Some of the relevant stocks and currencies affected by the Bank of Japan’s decisions include ETFs (JEQ), (EWJ), (DXJ), (FXY) and the currency pair (USD:JPY).
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