BoJ Interest Rate Decision and Governor Commentary
The Bank of Japan (BoJ) maintained its ultra-easy monetary policy settings, a move that was widely anticipated. This decision allows more time to assess if wage increases will sufficiently broaden to sustainably maintain the 2% inflation target. BoJ Governor Kazuo Ueda commented that higher wage prospects are gradually influencing sales prices, leading to a slow increase in service prices. He indicated that if evidence suggests a positive wage-inflation cycle is intensifying, the feasibility of continuing the massive stimulus program will be examined. Ueda expressed confidence in avoiding major irregularities in policy shifts. He also noted that the likelihood of achieving the 2% inflation target is gradually increasing, but it's challenging to quantify the progress.
Quarterly Report and Inflation Forecasts
In its quarterly report, the BoJ slightly lowered its core consumer inflation forecast for the fiscal year beginning April 2024 to 2.4% from the 2.8% projected in October, while slightly raising the forecast for fiscal 2025 to 1.8% from 1.7%.
Start investing today or test a free demo
Create account Try a demo Download mobile app Download mobile appCPI core forecasts:
- Core CPI fiscal 2023 median forecast at +2.8% vs +2.8% in October
- Core CPI fiscal 2024 median forecast at +2.4% vs +2.8% in October
- Core CPI fiscal 2025 median forecast at +1.8% vs +1.7% in October
GDP forecasts:
- 2023 1.8% vs. 2.0% in October
- 2024 1.2% vs. 1.0% in October
- 2025 1.0% vs. 1.0% in October
The report highlighted the balanced risks to economic activity and the need to monitor the intensification of the virtuous cycle between wages and prices. The BoJ reiterated its commitment to continue with Quantitative and Qualitative Easing (QQE) with Yield Curve Control (YCC) as long as necessary and won't hesitate to take additional easing steps if needed.
JPY Market Reaction
Following the BoJ's decision, the Japanese Yen (JPY) initially weakened against the US Dollar but recovered some ground as investors anticipate a potential exit from the negative interest rates regime by March or April. The likelihood of achieving the 2% inflation target, as noted in the BoJ's policy statement, supports this expectation.
Source: xStation 5
The content of this report has been created by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. XTB S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.
