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- BoJ’s Ueda: Possible rate increase in July depending on data
BoJ’s Ueda: Possible rate increase in July depending on data
The Bank of Japan (BoJ) Governor Kazuo Ueda said on Tuesday that there is a chance that the Japanese central bank could raise interest rates at the July meeting, depending on economic, price and financial data and information available at the time.
Key quotes
Sees moderate recovery in Japan's economy.
Expects a gradual rise in price trend.
Monitoring the FX impact on the economy and inflation.
Data out since April is roughly in line with BoJ estimates.
To conduct appropriate policy aligned with economic conditions
To adjust the degree of easing as needed using rates.
Sees economic data in line with expectations.
Sees uncertainty in expected price increase.
JGB yields are determined by the market.
Aims to boost market influence by reducing bond purchases.
Difficult to determine scale of reduction in bond purchases now.
Seeks predictability for bond purchases.
Sees possible rate increase in July depending on data.
Rate hikes and bond purchases are distinct matters.
Market reaction
At the time of writing, USD/JPY is trading 0.06% lower on the day to trade at 157.63.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan has embarked in an ultra-loose monetary policy since 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds.
The Bank’s massive stimulus has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy of holding down rates has led to a widening differential with other currencies, dragging down the value of the Yen.
A weaker Yen and the spike in global energy prices have led to an increase in Japanese inflation, which has exceeded the BoJ’s 2% target. Still, the Bank judges that the sustainable and stable achievement of the 2% target has not yet come in sight, so any sudden change in the current policy looks unlikely.
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