Recapping the Bank of Japan monetary policy decision today – rates unchanged again

December 19, 2024 at 04:09AM
The posts from earlier are here:

Bank of Japan leaves rates unchanged, as expected

Bank of Japan comprehensive review on past monetary easing steps

USD/JPY jumps above 155.20 after BoJ votes 8 – 1 to leave rates unchanged again

But if you want a quickie rundown:

Interest Rates Held Steady: The BOJ kept its short-term policy rate unchanged at 0.25%, with an 8-1 vote among its board members.

Dissenting Vote: Board member Naoki Tamura, a policy hawk, proposed raising rates to 0.5%, citing rising inflationary risks. His proposal was voted down.

Future Rate Hikes Expected: Markets anticipate the BOJ will raise rates early in 2025, with most expecting a hike to 0.5% by March.

Economic Conditions:

Japan’s economy is recovering moderately, with some weaknesses.

Consumption is increasing, but uncertainty around U.S. policies and slowing demand in China could weigh on growth.

Annualized GDP growth slowed to 1.2% in Q3, with consumption rising a modest 0.7%.

Inflation Trends:

Core inflation has fallen from a peak of 4.2% in January 2023 to 2.3% in October.

Wage growth, currently at 2.5%-3%, is expected to continue amid labor shortages, supporting the BOJ’s gradual rate hike strategy.

Market Reaction:

The yen initially fell to a one-month low against the dollar before recovering slightly.

Investors are watching BOJ Governor Kazuo Ueda’s press conference for clues on the timing of the next rate hike.

Background:

The BOJ ended negative interest rates in March 2024 and raised its policy target to 0.25% in July.

Future hikes depend on wage growth and inflation aligning with the BOJ’s projections.

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Next up we will have the press conference from Bank of Japan Governor Ueda. This is due at 0630 GMT (0130 US Eastern time) and I expect Ueda to sound a hawkish note or two.

USD/JPY update:

This article was written by Eamonn Sheridan at www.forexlive.com.