During a recent meeting, the Bank of Japan (BoJ) board members discussed the current monetary policy framework, reflecting on Japan’s economic condition and inflation dynamics.
The BoJ has opted to maintain the uncollateralized overnight call rate at approximately 0.25%, consistent with its previous guidelines. The central bank is also continuing its substantial monthly purchases of Japanese Government Bonds (JGBs), allocating ¥4.9 trillion. The Japanese economy has been experiencing a moderate recovery, bolstered by improvements in corporate profitability and stable employment levels, although some areas continue to exhibit weaknesses. The current inflation rate remains within the range of 2.0% to 2.5%, driven by rising prices in services and wage increases, although the effects of prior hikes in import prices have begun to dissipate.
In examining its long-standing monetary policy since the late 1990s, the BoJ acknowledged both the advantages and potential downsides associated with extensive monetary easing. Board members highlighted the importance of achieving sustainable inflation close to 2%, indicating that any adjustments to the policy would need to be made with caution. While there were suggestions from some board members to raise the interest rate to 0.5%, the predominant view led to a decision to keep rates steady at 0.25%. This choice was rooted in concerns over uncertainty regarding wage growth and the broader global economic climate.
The BoJ emphasized that any future policy alterations would hinge on developments in inflation, wage growth, and risks emanating from the global economy. Their policy statement reflecting unanimous approval underscored a commitment to ongoing monetary easing while maintaining vigilance over inflationary pressures and financial stability.
As for the market reaction to these developments, the USD/JPY currency pair showed a slight increase, reflecting a 0.04% rise to 155.58 at the time of the report.
