The Bank of Japan is largely expected to keep interest rates steady at the end of its two-day meeting ending June 14, 2024. Pictured, the Japanese flag is flying high at BOJ headquarters in Tokyo.
Kazuhiro Nogi | Afp | beautiful images
The Bank of Japan kept its benchmark interest rate unchanged on Friday, but said it was considering reducing its purchases of Japanese government bonds.
The central bank kept short-term interest rates unchanged at between 0% and 0.1% at the end of its two-day policy meeting, as widely expected.
But notably, the bank said in its statement that it may reduce its purchases of Japanese government bonds after the next monetary policy meeting, scheduled for July 30 and 31. .
The decision was passed with an 8-1 majority vote, with board member Nakamura Toyoaki dissenting.
Toyoaki favors reducing JGB purchases, but thinks the BOJ should only decide on a reduction after reassessing developments in economic activity and prices in its July 2024 outlook report, scheduled for July 31 .
Ahead of its next meeting, the BOJ said it will gather views from market participants and will decide on a detailed plan for reducing purchases within the next one to two years.
Purchases of JGBs, commercial paper and corporate bonds will also continue as decided in the March monetary policy meeting.
After the BOJ decision, the Japanese yen weakened 0.52% to 157.84 against the US dollar, while bond yields JGB 10 years decreased 44 basis points to 0.924.
Correct score Nikkei 225 rose 0.68%, reversing earlier losses, while Topix was 0.71% higher.
Bold policy steps
In March, BOJ raised interest rates for the first time in 17 years – ending the world’s last negative interest rate regime – and scrapping yield curve control in a radical policy move.
However, the central bank said at the time it would continue buy JGB at a rate of about 6 trillion yen (38.17 billion USD) per month.
According to a note by consulting firm Teneo published on June 13, although the large-scale JGB purchases have effectively stabilized the 10-year JGB yield at around 1%, it indirectly caused adding downward pressure on the weak Yen.
On May 8, BOJ Governor Kazuo Ueda said the central bank will carefully consider the recent decline in the yen in conducting monetary policy. Reuters report.
It comes later quiet slide to one The lowest level in 34 years, trading at 160 per dollar in late April, which prompted the BOJ to intervene to support the currency.
“A one-sided yen depreciation is negative for the economy and therefore undesirable,” Ueda told parliament, as it makes it difficult for companies to make business plans.
“If currency fluctuations affect or threaten to affect inflation trends, the BOJ must respond with monetary policy,” he added.
