BOJ Interest Rates Announced
London: 31 October 2023 (TraderMade): The Bank of Japan (BOJ) has decided to maintain ultra-low interest rates and make slight adjustments to its yield curve control (YCC) policy, as well as forecasting higher inflation levels in the coming years.
The BOJ kept its short-term interest rate at -0.1% and indicated using the upper end of its 1% YCC band as a reference cap for market operations. This shift marks a subtle change in the BOJ's messaging and introduces added flexibility.
Effect on JPY
In response to this decision, the yen depreciated by 0.5%, momentarily crossing the 150 level against the dollar, disappointing market participants anticipating a more hawkish stance.
Recent data revealed that Japanese consumer inflation exceeded expectations in September and October, consistently exceeding the BOJ's target range for 18 consecutive months.
Furthermore, the BOJ anticipates increased downward pressure on Japanese economic growth, primarily due to deteriorating growth in major trading partners, reinforcing the need for ongoing stimulus measures.
While Japan's economic growth has displayed resilience, mounting inflationary pressures and worsening economic conditions in its key export markets pose challenges to the world's third-largest economy.
