BOJ Delicate move: The yen saw a modest decline on Monday as the Bank of Japan (BOJ) commenced its two-day monetary policy meeting. Traders are on edge, anticipating whether the dovish central bank might finally unwind its ultra-loose monetary settings. The broader market exhibited caution as the week began, reflecting the aftermath of significant swings last week, primarily influenced by central bank meetings, including the Federal Reserve, the European Central Bank (ECB), and the Bank of England (BoE).
The yen slipped 0.2% to 142.41 per dollar in early Asian trade, partially reversing the nearly 2% gain made last week due to the dollar’s decline. The currency’s recent volatility stems from the uncertainty surrounding when the BOJ might phase out its negative interest rate policy. Governor Kazuo Ueda’s comments earlier this month initially triggered a substantial yen rally, which was later reversed with news suggesting a policy shift might not come as early as December.
Investors now await Tuesday’s BOJ decision for further clarity on the bank’s rate outlook. Rodrigo Catril, senior FX strategist at National Australia Bank, noted, “The meeting will be relevant and important in terms of what the BOJ does, and there are some in the market that still expect that maybe there’s a surprise.”
He added, “We tend to lean to the idea that they’re still on wait-and-see mode… for more evidence, in particular the labor market and wages growth are rising towards the 2% level, at the minimum. The best-case scenario would be for the bank to set the stage for things to come in 2024, conditional on these economic outcomes being delivered.”
Also Read: Market Jitters: Asia Faces BOJ Speculation, U.S. Inflation Focus
Against the euro, the yen edged 0.1% lower to 155.11, while the Australian dollar rose 0.13% to 95.45 yen. The broader foreign exchange market also witnessed the dollar holding close to recent lows against various currencies.
The dollar index, which experienced a roughly 1.3% decline last week after the Fed hinted at potential rate cuts next year, was last 0.05% lower at 102.57. Franck Dixmier, global chief investment officer for fixed income at Allianz Global Investors, observed, “The Fed has officially opened the door to the next cycle of rate cuts.”
He highlighted the stark contrast between the Fed’s approach and that of the ECB and BoE, which both kept interest rates steady at their respective policy meetings last week. Dixmier noted that the ECB and BoE pushed back against expectations of imminent rate cuts, emphasizing the divergence in central banks’ strategies.
“The euro was last 0.07% higher at $1.0900, helped by a weaker dollar, though the single currency continues to be weighed by a darkening growth outlook in the euro zone,” the article concluded, summarizing the cautious atmosphere in the currency markets.
Our Reader’s Queries
What is the meaning of BOJ in finance?
Established in 1885, the Bank of Japan (BOJ) serves as the central bank of Japan. Its primary responsibilities include determining monetary policy, setting interest rates, and issuing and monitoring currency and treasury securities. As a key player in the country’s financial system, the BOJ plays a crucial role in maintaining stability and promoting economic growth.
What is the interest rate of the BOJ policy?
The Bank of Japan (BOJ) has announced its decision to maintain interest rates at -0.1%. The BOJ has also confirmed its commitment to the yield curve control policy, which sets the upper limit for the 10-year Japanese government bond yield at 1%. This decision was made unanimously and was announced in a policy statement on Tuesday.
What is the interest rate in Japan central bank?
In December 2023, the policy rate of the central bank in Japan remained at a negative 0.1 percent.
What is the mandate of the BOJ?
The Bank of Japan’s sole responsibility is to maintain stable prices in a sustainable manner. To achieve this, the BOJ has implemented a highly accommodative monetary policy, which includes negative short-term interest rates and restrictions on longer-term rates. Japan has been grappling with economic stagnation and deflationary pressures for nearly 30 years.