The Bank of Japan Maintained the Loose Policy Setting Under its New Governor

  • USDJPY
    (${instrument.percentChange}%)

Ultra-Loose Policy

In the first meeting under new Governor Ueda, the Bank of Japan voted unanimously to maintain its ultra-loose policy stance. Policymakers kept rates unchanged at -0.1% and Quantitative & Qualitative Monetary Easing (QQE) with Yield Curve Control (YCC), allowing 10-year JGB yields to rise up to 0.5%, before stepping in. [1]

The decision was largely anticipated, as Mr Ueda had not shown any intention to rock the boat, but expectations for policy normalization are building. The central bank had opened the door to that back in December, with the widening of its yield curve target to the current +/- 0.5% range that had surprised markets. [2]

Not All Stayed the Same

Although policymakers largely maintained the status quo, they made changes to their communication around the forward guidance. They dropped the pledge for "interest rates to remain at their present or lower level" of the previous policy statements, although they vowed to "patiently continue with monetary easing".

Furthermore, the central bank announced a "broad-perspective" review of monetary policy, with in a rather wide timeframe of one to one-and-a-half years.

Upgraded Inflation Projections

Today's decision was accompanied by the updated forecasts, which showed that the BoJ lowered its expectation around economic growth and raised them around inflation, for current Fiscal 2023 (April 2023-May 2024).

CPI Inflation (ex-fresh food) is now projected at median of +1.8% (from +1.6% previously) and is expected to go higher to 2% in Fiscal 2024. Real GDP forecasts for Fiscal 2023 were lowered to +1.4%, from +1.7% prior. [3]

Market Reaction

The Bank of Japan upgraded its inflation forecast, which creates some pressure for policy normalization, but officials elected to maintain the ultra-loose setting and although they tweaked the communication, they still expect to continue monetary easing.

Immediate market reaction was negative for the Japanese Yen, sending USD/JPY higher.

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 28 Apr 2023 https://www.boj.or.jp/en/mopo/mpmdeci/mpr_2023/k230428a.pdf

2

Retrieved 28 Apr 2023 https://www.boj.or.jp/en/mopo/mpmdeci/mpr_2022/k221220a.pdf

3

Retrieved 03 Mar 2024 https://www.boj.or.jp/en/mopo/outlook/gor2304a.pdf

${getInstrumentData.name} / ${getInstrumentData.ticker} /

Exchange: ${getInstrumentData.exchange}

${getInstrumentData.bid} ${getInstrumentData.divCcy} ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%) ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%)

${getInstrumentData.oneYearLow} 52/wk Range ${getInstrumentData.oneYearHigh}
Disclosure

Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.

Past Performance: Past Performance is not an indicator of future results.

Spreads Widget: When static spreads are displayed, the figures reflect a time-stamped snapshot as of when the market closes. Spreads are variable and are subject to delay. Single Share prices are subject to a 15 minute delay. The spread figures are for informational purposes only. FXCM is not liable for errors, omissions or delays, or for actions relying on this information.