BOJ raises policy rate to 0.25% in July monetary policy meeting

July 31, 2024 at 04:57AM

Prior 0.10%

Nakamura, Noguchi dissented to decision on rates

To taper bond purchases to ¥3 trillion as of Q1 2026

That means to reduce scheduled monthly bond buying by around ¥400 billion each quarter

Bond tapering vote was unanimous

To review bond tapering plan in June next year via midterm review

Underlying inflation expected to increase gradually

Japan economy recovering moderately although some weakness has been seen

If outlook for economic activity and prices are realised, will continue to raise policy rates and adjust degree of monetary accommodation accordingly

It was the worst kept secret after the BOJ decidedly leaked the decision to the press yesterday already. Still, it took them forever to announce it.

The yen has whipsawed on the decision but USD/JPY is now settling a bit higher at around 153.20 levels, compared to 152.60 before the decision. Meanwhile, 10-year JGB yields have dipped slightly from 1.06% to 1.035% now. It is still higher after the overnight leak with the levels yesterday seen closer to 1.00% instead.

Going back to the decision itself, Noguchi argued that he dissented as he is not convinced by recent economic conditions. Higher prices had been weighing on consumption and that is something that the BOJ acknowledges as well.

As for the latest BOJ projections, you can find them here:

There is little change to the economic forecasts and the “core-core” inflation outlook for 2025 and 2026 remains relatively unchanged compared to before as well.

On bond tapering, it is as you would expect as they announce a more gradual take on things. There’s also the review period mentioned to see and adjust the pace accordingly, if needed.

This article was written by Justin Low at www.forexlive.com.