Japan’s BoJ will start reducing JGB purchases in August
At Friday’s meeting, the Bank of Japan (BoJ) announced its decision to start reducing the volume of its JGB purchases by a substantial scale in August to ensure long-term rates are more market-oriented. At the next policy meeting on July 30th-31st, the bank will decide a detailed plan and schedule for the reduction covering the next two years after consulting with market participants.
What you will learn:
- As expected the BoJ decided to maintain its policy rate at 0%-0.1%. Wage growth looks set to remain robust based on the latest tally of the Spring Wage Negotiation, but household income and consumption are still weak and core-core CPI (excluding energy and fresh foods) eased further in April reflecting receding supply-side inflationary factors.
- Speculation over earlier tightening is rising in response to the weak yen. However, we believe the BoJ will wait until September to confirm that the strong wage settlement effectively raises real household incomes, and that consumption has gained momentum during the summer vacation.
- Despite recent hawkish statements by BoJ officials, we still think the yen weakness is unlikely to be a trigger for a rate hike. Most importantly, the BoJ’s rate hike will have only a limited impact on the currency which is dominated by the US monetary policy outlook.
Tags:
Related Posts
Post
Japan’s politics add uncertainty to BoJ policy outlook
The Bank of Japan (BoJ) kept its policy rate at 0.5% at its October meeting, after a 7-2 majority vote. Two board members again voted for a rate increase. We believe the BoJ will hike in December to 0.75% as incoming data confirm that the economy is performing in line with the bank's forecasts in its quarterly outlook. However, there's a material chance of a delay.
Find Out More
Post
Japan’s December rate hike appears likely, though there is a risk of delay
We've brought forward the timing of the next Bank of Japan (BoJ) 25bps rate hike to December from next year and have added another 25bps hike in mid-2026. This reflects the surprisingly hawkish shift in the BoJ's view since its September policy meeting and upward revisions to our growth and inflation projections, driven by the US economy's resilience.
Find Out More
Post
BoJ announces cautious plan to sell ETF and J-REIT holdings
At its monetary policy meeting on Friday, the Bank of Japan (BoJ) unexpectedly announced it would start to sell its ETF and Japanese real estate investment trust (J-REIT) holdings. We think the impact of this plan on financial markets will likely be limited because the BoJ is opting to play it safe in terms of the process and the scale.
Find Out More
