Bank of Japan Policy Shifts: A recent survey found that most analysts expect the Bank of Japan (BOJ) to reduce its large monetary easing in a year. This prediction follows a stunning yield control adjustment last month, which reduced speculation of further policy changes.
At its July 27-28 meeting, the BOJ changed its yield curve control (YCC) framework, allowing for more flexible interest rate increases. This move officially continues easing, but market interpretations see it as a precursor to eliminating long-term stimulus. The August 15-23 poll found that only 5% (1 out of 22 analysts) expect the BOJ to abandon its ultra-relaxed policy this year, down from 50% in July.
Breaking down the survey, BOJ action predictions varied. Between January and March 2024, four economists expect the BOJ to begin its policy retreat. Five analysts expect this in AprilJune. Six predict July-September. Another six predict OctoberDecember.
Takumi Tsunoda, a renowned economist at Shinkin Central Bank Research Institute, said the BOJ will hold steady until next summer. This is because Japan’s fiscal year 2024 salary trend details won’t be available until spring.
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Japan needs sustained wage increases to achieve growth-driven inflation and normalize the BOJ’s ultra-accommodative posture.
In a separate poll, 73% of analysts predicted the BOJ to end the YCC by next year, up from 50% in July. T&D Asset Management chief strategist and fund manager Hiroshi Namioka noted the YCC system’s complexity. He said that Governor Kazuo Ueda may consider a market-driven yield setting technique, indicating that the system may be ended soon.
The BOJ’s negative short-term interest rate policy is expected to end in 2024 by 41% of analysts, down from 54% in May. In the latest survey, 59% said this transformation will happen in “2025 or later,” up from 42% in May.
The study asked how low the Japanese government would put the yen to prevent further decline. A majority of 67% of experts suggested 150 yen per dollar to start this action, while 25% suggested 155.
Due to growing interest rate discrepancies between the U.S. and Japan, the yen fell to a nine-month low, topping 146 per dollar earlier this month. This decrease sparked government yen-purchasing speculation. Japan last intervened in the currency market in October.
After 6.0% economic growth in April-June, other economic forecasts predict a 1.2% fall in Japan’s annualized GDP for July-September. The GDP growth forecast for fiscal 2023 has been raised to 1.8% from 1.1%, but the forecast for fiscal 2024 has been lowered to 0.9%.
Our Reader’s Queries
What is Bank of Japan policy rate?
In November 2023, the policy rate of the central bank in Japan remained at a negative 0.1 percent.
What time does the Bank of Japan open?
The Bank operates from 8:50-17:00 JST, except during holidays. Please refer to the Bank’s Holiday Schedule for more information.
How does the Bank of Japan work?
The Bank of Japan is responsible for issuing banknotes and ensuring their smooth circulation and credibility across the country. Its primary goal is to achieve price stability through monetary policy, which in turn contributes to the healthy growth of the national economy. With a focus on maintaining the integrity of its banknotes, the Bank plays a crucial role in the financial system of Japan.
What are some duties of the policy board of the Bank of Japan?
The Policy Board is the Bank’s top decision-making body. It sets the guidelines for currency and monetary control, establishes the basic principles for the Bank’s operations, and ensures that the Bank’s officers fulfill their duties. The Board does not oversee the work of Auditors and Counsellors.