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
Trump policies provide tailwinds for industries, with exceptions in Japan
We expect the impact of Trump policies will be a net positive for Japan. The boost from higher import demand due to expansionary fiscal policies will likely overwhelm the adverse impact of targeted tariffs on Japan. The US is Japan's biggest goods export destination, accounting for 20% of total. Most traded items such as machinery and automotives are set to benefit from higher investment demand and consumer spending.
Find Out More
Post
Japan expects mixed impacts from Trump’s second presidency
We've adopted our "limited Trump scenario" as our baseline forecast for Japan. We now assume that the US will impose targeted tariffs on Japan's exports, among several other economies. We think these measures will have a limited impact on overall growth, but globally higher trade barriers are likely to hit Japanese manufacturers' profitability and financial markets. In addition, there is a non-negligible risk that Trump could implement even stricter tariffs.
Find Out More
Post
Japan’s BoJ outlook update – Rate hike is now more likely in January
We now believe that the Bank of Japan will wait until January to hike the policy rate. We previously assumed a 60% chance of a hike at the meeting on December 19, but recent media reports signal that more board members will likely prefer to wait to see more data to confirm the momentum of wage-driven inflation and US policy developments.
Find Out More