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 tariff turbulence to flatten near-term growth
We've cut our GDP growth forecasts for Japan by 0.2ppts to 0.8% in 2025 and by 0.4ppts to 0.2% in 2026, reflecting higher US tariffs and heightened global trade policy uncertainty. We now forecast that Japan's economy will barely grow over 2025-2026 on a sequential basis.
Find Out More
Post
25% auto tariffs especially painful in Japan and South Korea
US tariffs of 25% on all automobile and auto parts will weigh heavily on the Japanese and South Korean automotive sectors. A GTAP analysis suggests Japanese and South Korean automotive production will each shrink by approximately 7%. The impact is larger than suggested by bilateral trade data, because vehicles assembled in other countries before being shipped to the US will also be affected, dampening domestic auto parts production.
Find Out More
Post
‘Liberation Day’ 24% tariff will limit Japan’s growth
The 'Liberation Day' tariffs, together with separately announced higher tariffs on auto imports to the US, will lead us to cut our growth forecast for Japan. The direct impact of the tariffs will end the modest growth we projected in March, and we now think the economy will barely grow in 2025-2026. This initial estimate does not consider the indirect impact from high trade policy uncertainty and retaliation from other economies.
Find Out More