James Lau’s Post

The Bank of Japan is forecast to keep its interest rate settings unchanged Friday, with the yen’s plunge this week to a fresh 34-year low making it more likely the bank will tone down its stance on keeping policy easy. https://lnkd.in/gkZi2MqC The spotlight on Governor Kazuo Ueda will be more intense than usual as currency officials have intensified warnings to traders over the yen, and with business executives increasingly vocal about their currency concerns. Market players will scrutinize the policy statement, the quarterly economic outlook and Ueda’s remarks for hawkish signals, and for anything new on bond purchase plans. “This meeting is to examine the impact of the shift in the policy framework in March,” said Mari Iwashita, chief market economist at Daiwa Securities. “Given the weak yen and elevated oil prices, there is a chance for upside risks to intensify for inflation.” The yen fell through the key threshold of 155 to the dollar this week, the weakest level since 1990, keeping currency traders on high alert for the possibility of government intervention. Japan’s top currency officials have indicated frustration over the yen’s continued slide even after the BOJ’s first rate hike since 2007 last month.

The Bank of Japan (BoJ) increased its benchmark short-term interest rate from the range it had established in March of 0 to 0.1% to approximately 0.25% during its meeting in July 2024. The central bank further stated that to pursue a more normal monetary policy, it will cut the monthly bond-buying from the current rate of about ¥6 Trillion to ¥3 Trillion in January–March 2026. Beginning in August, the BoJ will no longer make the ¥400–550 billion continuing offer range; instead, it will offer to acquire ¥400 billion of 5- and 10-year JGBs at each of its operations. The adjustments are a part of the central bank's strategy to gradually remove itself from the bond market and reduce its nearly USD 5 trillion balance sheet. The BoJ predicted in a quarterly outlook that core inflation for FY 2024 would be less than April's estimates of 2.8%, likely falling around 2.5%. About 2% will be the amount for FY25 and FY26. In terms of GDP, officials revised their growth estimate to 0.6% from 0.8% in 2024 based on statistical evidence. The bank kept its GDP forecast for FY25 and FY26 at 1.0%. Ueda San will continue to shift the BoJ away from purchasing more treasury, halving the activity by 2026—a 0.25% increase is a safer bet that would support Yen trade without penalising the broader market and running the carry traders over. Although I expected the hike to be around 0.50%, a positive welcome by the Bank of Japan nonetheless. Over at the Atlantic Ocean, the annual inflation rate for July 2024 in the Euro Area unexpectedly increased to 2.6% from 2.5% in June, contrary to predictions that it would decline to 2.4%, according to early data. In addition, the cost of non-energy industrial items climbed more quickly (0.8% vs.0.7%). The cost of energy- increased by 1.3%, significantly more than the 0.2% increase in June. However, the cost of food, drink, and tobacco fell to 2.3% from 2.4%, while services dropped to 4% from 4.1%, marking the first decline in three months. With energy excluded, inflation decreased from 2.8% to 2.7%. The core rate, which does not include the cost of food, energy, alcohol, or tobacco, remained constant at 2.9%, contrary to estimates of 2.8%. Germany (2.6% vs 2.5%), France (2.6% vs 2.5%), and Italy (1.7% vs 0.9%), inflation rates increased among the bloc's major economies but eased in Spain (2.9% vs 3.6%). As previously stated, the ECB made a daring decision by lowering interest rates early- and the current report confirms this. ECB has backed itself into a corner, with inflation continuing to be sticky and very conservative growth in a few countries. Germany continues to be the problem child and will continue to underperform due to its exposure to China. USDJPY: 150.3610 JP10Y: 1.061% Nikkei 225: 39,101.82 EURUSD: 1.0833 EU10Y: 2.322% STOXX600: 518.98 CAC40: 7,573.41 DAX: 18,503.24. Source: Bank of Japan, EUROSTAT, Barchart.

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

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

It actually happened. TOKYO -- The Bank of Japan on Wednesday announced an interest rate increase and a bond tapering plan, in an aggressive move that signals the central bank's growing confidence in the recovery of the domestic economy and its concern about the sharply weaker yen. In a two-day policy meeting, the BOJ said it will guide an uncollateralized overnight call rate to 0.25% from between 0% and 0.1%, in the second rate rise this year following the one on March 19 when the central bank lifted a negative interest rate policy and ended equity purchases and yield curve controls. Only 26% of market players expected a rate rise, according to a survey of 181 bond investors conducted by Nikkei affiliate QUICK between July 23-25. Most investors expected a rate increase to take place either in September or October. The bank also announced a plan to taper its purchases of Japanese government bonds (JGBs). Monthly purchases will be reduced to 3 trillion yen by the first quarter of 2026 compared with the current pace of 6 trillion yen. As of March, the BOJ had accumulated 576 trillion yen-worth of JGBs, or 53% of the total outstanding debt of the Japanese government, under an aggressive 'quantitative easing' program launched in 2013. Following the tapering program, the central bank is expected to remain the biggest holder of JGBs in the coming years. https://lnkd.in/gtr3ZiAZ

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..)

The Bank of Japan's Interest Rate Decision: What's Cooking? This week, all eyes were on a major event: the inauguration of U.S. President Donald Trump on Monday, January 20. Naturally, people are keen to see how his initial moves will ripple through the economy. But wait, there’s another crucial event happening right after that the Bank of Japan (BoJ) meeting on January 23–24.   What's Expected? It’s widely anticipated that the BoJ will raise its interest rate by 25 basis points, pushing it to 0.5%. This would mark the third hike in its current tightening cycle, which started back in March 2024. Historically, the BoJ has danced to its own beat, maintaining ultra-loose policies while central banks like the Federal Reserve, the European Central Bank, and the Bank of England raised rates to curb inflation.   For years, Japan has been stuck in a unique economic pickle: decades of price stagnation and lackluster growth.   Why the Change of Tune? Here’s the kicker: Inflation in Japan has been above the BoJ’s 2% target for over two and a half years! In November, inflation hit 2.7%. Now, why didn’t the BoJ jump on the rate-hiking bandwagon earlier? Well, initially, the inflation was driven by higher import costs due to a weak yen. It didn’t make much sense to rush into rate hikes then.   But now? Things have changed. Wage growth, a critical factor for sustainable inflation has kicked into high gear. Japan saw average wage increases of over 5% last year, the highest jump in over 33 years. It’s what economists call a "virtuous cycle": higher wages lead to more spending, which boosts corporate profits, encouraging more hiring and even higher wages. Pretty neat, right?   Lessons Learned Last July, when the BoJ raised rates unexpectedly, markets were caught off guard, leading to chaos. This time, they’re playing it smart, signaling their intentions well in advance. After all, no one likes surprises, except maybe on their birthday.   What Could Spoil the Party? One wildcard: President Trump’s trade policies. If he goes rogue and slaps tariffs on major trading partners like China or Mexico during his first week in office, it could send markets into a tailspin, potentially forcing the BoJ to delay its rate hike. Let’s hope he’s too busy settling into the White House to cause trouble! GODO #USDJPY #JPY #BOJ

TOKYO, July 31 (Reuters) - The Bank of Japan raised interest rates in a mostly unexpected move on Wednesday and unveiled a detailed plan to slow its massive bond buying, taking another step towards phasing out a decade of huge stimulus. The decision, which defied dominant market expectations for the BOJ to stand pat on rates, takes its short-term policy rate to levels unseen since 2008. At the two-day meeting ending on Wednesday, the BOJ's board decided to raise the overnight call rate target to 0.25% from 0-0.1% in a 7-2 vote. It also decided on a quantitative tightening (QT) plan that would roughly halve monthly bond buying to 3 trillion yen ($19.6 billion), from the current 6 trillion yen, as of January-March 2026.