Research Briefing | Sep 25, 2023

BoJ will continue effective zero interest rate policy anyway in Japan

The Bank of Japan (BoJ) maintained the policy rates at its September meeting, following a tweak in its yield curve control policy in July. Although this decision was widely expected, the markets are starting to speculate policy changes within the coming quarters, especially after the BoJ governor’s recent interview.

What you will learn:

  • We believe inflation will start easing soon, as import price-driven food inflation abates. CPI (excluding energy) is expected to slow to around 2% by Q1 next year from more than 4% in August.
  • We continue to believe that the BoJ will maintain the status quo at least until the midst of next year to make a careful assessment on whether the 2% inflation target could be achieved in a stable manner within Governor Kazuo Ueda’s five-year term.
  • However, the BoJ’s confusing communication has fuelled speculation about the possible end of the negative interest rate policy (NIRP) within the next six months.
  • Regardless of the timing, we believe that the end of NIRP will have limited impact on bank lending rates and the real economy as the effective zero interest rate policy will continue.
Back to Resource Hub

Related Posts

Monetary policy in ASEAN shifts focus

Post

Monetary policy in ASEAN shifts focus

With the US Fed expected to remain on hold for a prolonged period, rate decisions in Asia are likely to become more idiosyncratic. We discuss the actions of three central banks, namely Bank Indonesia (BI), Bank Negara Malaysia (BNM), and the Bank of Thailand (BOT).

Find Out More
Japan currency

Post

BoJ to allow 10-year JGB yields to exceed 1%

The Bank of Japan (BoJ) left short- and long-term policy rates unchanged at -0.1% and around 0%, respectively, at the meeting on Oct.31. However, the BoJ decided to tweak the yield curve control (YCC) policy by setting the upper bound of 1% as a reference and by making its Japanese Government Bond (JGB) purchase operations more flexible not to rigidly defend the bound.

Find Out More
Populated street in india

Post

China-India: population size matters, but it’s not all

India appears the economy most like China as it is the only one that can match it in terms of population size. But that's where many of the similarities end – in most other population characteristics the two countries are very different.

Find Out More