What To Expect From BoJ Tomorrow?

London: 18 December 2023 (TraderMade): Japan's central bank maintained ultra-low interest rates on 31 October 2023 but loosened its grip on long-term yields. The Bank of Japan (BoJ) kept its short-term rate at -0.1% and its 10-year bond yield target near 0%.

However, they shifted from a rigid 1% cap to a more flexible "upper bound" for bond yields. Inflation forecasts surged, exceeding the 2% target. The BoJ now sees inflation at 2.8% in 2023 and 2024, driven by past energy price hikes and import costs. However, they expect a dip to 1.7% in 2025 as these effects fade.

The BoJ maintained its cautious outlook for the economy. The central bank acknowledged that the ongoing global economic slowdown poses downside risks to Japan's recovery.

However, it also expects domestic demand to remain firm, supported by factors like pent-up demand and government stimulus. The BoJ reiterated its commitment to maintaining loose monetary policy. The bank is firm on not hesitating to take additional easing measures if necessary to achieve its inflation target and support economic growth.

The economy is recovering moderately, but risks loom. The BoJ sees pent-up demand supporting growth but warns of a potential slowdown due to a weakening global economy. They remain ready to ease policy further if needed.