Ben Ezra’s Post

BOJ to Hold Rates With Focus on Hawkish Signals to Buoy Yen. (23/4/2024)   (Bloomberg) -- The Bank of Japan is widely expected to leave its benchmark interest rate unchanged Friday, with investors focusing on any hints of a less dovish tilt as the yen trades around a 34-year low. Governor Kazuo Ueda and his fellow board members are set to keep the short-term rate around 0% to 0.1% at the end of their two-day policy meeting, after the central bank called time on its massive monetary easing program last month, according to all but one of 53 surveyed economists. Just five weeks since that monumental shift, Ueda faces the challenge of striking a delicate balance between putting a floor under the yen while also supporting a fragile economic recovery. The yen surprised Japanese authorities by retreating even after Japan conducted its first rate hike since 2007. The weak currency could spur cost-push inflation, and some executives at businesses that benefited from the depreciation of the currency have started to express concerns about the overall impact. That has sharpened the focus of market players on whether the bank might send a clearer signal of policy normalization this time around. “The risk is rising for a front-loading of a rate hike in June or July,” said Ryutaro Kono, chief Japan economist at BNP Paribas SA. “The yen is likely to keep falling gradually,” as the government views intervention as insufficient to shift the tide in light of strong US economic data and escalating geopolitical risks in the Middle East, he said. The BOJ’s latest quarterly inflation forecasts and its characterization of the risks to its view are among the easiest ways the central bank could flick at the possibility of earlier rate hikes. Other potential areas include its bond-buying plans and the language the central bank uses to describe its purchases, according to some market watchers. Read more: Bond Traders on Tenterhooks for Any Signal From BOJ on Purchases Governor Ueda hasn’t ruled out responding to exchange rates with a policy move if the impact on prices is seen to be “non-negligible.” The yen fell to 154.85 versus the dollar overnight, the weakest level since June 1990. Traders are on high alert over the possibility Japanese officials might step back into the market to buy the nation’s currency, as they last did in 2022. For now BOJ policy is continuing to weigh on the yen. Ueda has emphasized that he expects financial conditions to stay easy to ensure there’s no disruption to markets or the economic recovery stemming from the BOJ’s policy pivot. That message may have permeated markets too strongly, analysts say. (continue..)

(Bloomberg) -- Japan likely stepped into the currency market for a second straight day on Friday, a Bloomberg analysis of the central bank’s current account indicates. Tokyo’s latest market entry was likely around ¥2.14 trillion ($13.5 billion), based on a comparison of Bank of Japan current account data and money broker forecasts. The bank expected its current account to fall ¥2.74 trillion due to fiscal factors including government bond issuance and tax payments on Wednesday, much bigger than a drop of about ¥600 billion estimated by Central Tanshi Co. and Ueda Yagi Tanshi. The yen strengthened sharply by as much as 0.9% to 157.38 per dollar on Friday after producer prices data in the US. The move came after a suspected intervention on Thursday night, when the government likely spent $22 billion to prop up the yen following weaker-than-expected US inflation data. The suspected second intervention, if confirmed, would be a fresh example of the government conducting a follow-up move after a larger-scale operation to keep traders on alert. Bloomberg analysis of the central bank’s current account and money broker estimates earlier indicated that a two-punch operation occurred in late April and early May. Japanese finance ministry data showed a follow-up intervention took place in October 2022. Link: https://lnkd.in/eQiyNmQt My take: The BoJ spent over $35 billion last week intervening to prop up the yen. Why? Because as yen slides, inflation pressures in Japan build and that would force them to hike rates which will send shockwaves across global bond markets. Stay tuned, this is getting interesting. Will macro traders break the BoJ like Soros once broke the BoE? Doubt it but you never know! Technical note: It’s up to the Ministry of Finance to intervene and it uses the BoJ as its agent to do so . The BoJ acts on intervention.

"The Bank of Japan on Wednesday (31 July 2024) raised its policy interest rate to around 0.25 percent and decided to slow the pace of its government bond buying to 3 trillion yen ($20 billion), in a further shift toward policy normalization as the nation battles a weakening yen. In its first increase since the symbolic end of its negative rate policy in March, the BOJ judged it appropriate to lift short-term interest rates to their highest level since 2008, from a range of zero and 0.1 percent. BOJ chief Kazuo Ueda said economic and price developments are 'on track' with their forecasts, but warned of upside risks to prices, especially due to the precipitous drop in the yen. Depending on incoming economic data, an additional interest rate hike may be possible, he added. ... 'The (headline) inflation rate has been consistently above 2 percent for an extended period. In view of further upside risks to inflation, we thought now was the right time,' Ueda told a press conference. 'I don't think the rate increase will have a serious negative impact on the economy because it's still at low levels,' he said." "The combination of a rate increase and a reduction in government bond purchases had not been ruled out but was seen by many analysts as unlikely, given the fragility of the Japanese economy, especially private consumption. ... As the BOJ embarks on quantitative tightening, a process to reduce asset holdings on its bloated balance sheet, its bond buying will be halved from the current 6 trillion yen a month by March 2026. The taper plan is estimated to lead to a 7 to 8 percent decrease in the central bank's government bond holdings, which total a whopping 600 trillion yen. 'It will still be far from a desirable size. We will determine exactly what would be the preferable level by looking at other central banks (reducing their balance sheets after monetary easing),' Ueda said. The tapering pace may change, the BOJ said, adding that it will carry out buying 'flexibly' to prevent a surge in bond yields. It will also review the purchase plan in June 2025. The latest outcome reflects the BOJ's growing confidence about the possibility of achieving its 2 percent inflation goal, accompanied by wage growth." BOJ hikes rates to 0.25% in push toward normalization amid weak yen, 𝘒𝘺𝘰𝘥𝘰 𝘕𝘦𝘸𝘴, 31 July 2024, https://lnkd.in/gwJzxYhF

The Bank of Japan (BOJ) announced on Friday that it will begin reducing its substantial bond purchases, with a detailed plan to be unveiled next month, marking a step towards unwinding its extensive monetary stimulus. Governor Kazuo Ueda indicated that an interest rate hike in July is possible, as the weak yen increases import costs, maintaining the BOJ's hawkish stance despite economic and consumption challenges. The BOJ kept its short-term rate target at 0-0.1% and continued its bond-buying pace at 6 trillion yen per month. The detailed bond tapering plan will be discussed at the July meeting to ensure market stability and predictability. Lastly, the yen fell to a one-month low against the dollar, and 10-year Japanese government bond yields dropped following the announcement. The BOJ's cautious approach contrasts with the more aggressive tightening seen from other major central banks like the Federal Reserve and the European Central Bank and the markets are pricing dearly this approach. #BOJ #MonetaryPolicy #InterestRates #BondPurchases #KazuoUeda #JapaneseEconomy #Yen #Inflation #FinancialMarkets #EconomicPolicy https://lnkd.in/dwED6khQ

Bloomberg on the outcome of the #boj Bank of Japan’s #monetarypolicy meeting. The Bank of Japan kept its policy rate unchanged Friday after its monetary policy meeting, holding its benchmark policy rate at 0%-0.1%. This is in line with expectations from economists polled by Reuters. While the move was expected, this comes after Tokyo’s April inflation came in lower than expected, with the core inflation rate at 1.6% compared to expectations of 2.2% from Reuters. The BOJ also said it will continue to conduct bond purchases. However, they dropped a reference to buying roughly the same amount of bonds as previously. No comment was made by the BOJ on the yen, which has steadily weakened since the BOJ ended its negative interest rate policy last month and abolished its yield curve control policy. The currency broke through the 156 mark against the U.S. dollar Friday after the decision, most recently trading at 156.11. Separately, the central bank also released its second-quarter outlook for Japan’s economy, raising its outlook for inflation in fiscal 2024. The BOJ now expects inflation between 2.5% and 3% for fiscal 2024, up from 2.2% to 2.5% in its January forecast. Inflation is then predicted to decelerate to “around 2%” in fiscal 2025 and 2026, the bank added. The BOJ also downgraded gross domestic product growth forecasts for fiscal 2024 to a range of 0.7% to 1%, down from January’s prediction of 1%-1.2% growth. Think of this as another small step in what the BoJ sees as a relatively long policy normalization journey. As mentioned by Mohamed El Erian, the length of this journey, both on a standalone basis and relative to the US, helps explain the weak #Yen. Source: Bloomberg, CNBC

In a bold move, the Bank of Japan (BOJ) raised interest rates to a level unseen in 15 years, marking a significant shift away from a decade of expansive stimulus policies. The hike, which defied market expectations, increased the overnight call rate target to 0.25% from the previous range of 0-0.1%. This decision, accompanied by a detailed plan to taper the BOJ's massive bond-buying program, underscores Governor Kazuo Ueda's commitment to steering the central bank towards a more conventional monetary policy stance. The BOJ's action contrasts sharply with the global trend of easing rates, particularly as the Federal Reserve in the U.S. signals potential cuts in response to cooling inflation. Ueda's hawkish remarks hinted at the possibility of further rate hikes, reflecting confidence in Japan's economic resilience and a cautious approach to avoid abrupt monetary shifts. The yen responded positively, appreciating against the dollar, while short-term bond yields and bank shares surged, indicating market approval. The BOJ's quantitative tightening (QT) plan aims to reduce monthly bond purchases to 3 trillion yen by early 2026, potentially shrinking the central bank's $3.9 trillion balance sheet by up to 8%. This move is a departure from the aggressive bond-buying initiated in 2013, which has been criticized for distorting Japan's financial markets. As the BOJ now holds nearly half of all Japanese government bonds, it faces the delicate task of unwinding its position without destabilizing the market or increasing Japan's substantial public debt burden. Ueda also highlighted the risks posed by a weak yen, which has pressured inflation and consumer prices, suggesting that the central bank remains vigilant about the currency's impact on economic stability. This decisive policy shift signals a new era for Japan's monetary policy #BankOfJapan #InterestRates #MonetaryPolicy #JapanEconomy #QuantitativeTightening #Yen #Inflation #KazuoUeda #GlobalMarkets #EconomicOutlook https://lnkd.in/dmR_xeJz

BoJ Hikes Key Rate Ahead Of Fed Announcement The Bank of Japan raised its benchmark rate unexpectedly and also outlined its tapering plans on Wednesday ahead of the Federal Reserve's monetary policy announcement. The policy board voted 7-2 to lift the uncollateralized overnight call rate to around 0.25 percent from around 0-0.1 percent. The new rate is the highest since late 2008. In a unanimous vote, the board decided to reduce the amount of its monthly outright purchase of government bonds to around JPY 3 trillion by the first quarter of 2026. Currently, the bank purchases around JPY 6 trillion bonds per month. BoJ's decision came ahead of the monetary policy announcement by the US Federal Reserve. The Fed is widely expected to keep its key rate unchanged today but keep the door open for a rate cut in September. #BankofJapan #BoJ #Japan #centralbanks #interestrates #ratehikes #Fedratehike #Yen #JPY