Trading within the current range may leave the 37,647 level as key support to watch, where the lower base of the range has provided support in recent months. Immediate resistance may be at the 14 January high at the 39,064 level, followed by the upper resistance of the range at the 40,220 level. Japanese policymakers have already jostled with the expectations of a major move to alter the ultra-easy monetary policy, by suggesting no need for monetary policy change. However, the recent announcements of the US bond issuance due to the debt-ceiling deal are talks of the town supporting the official push for higher rates in late 2023. It should be noted, however, that the BoJ’s play of the Yield Curve Control (YCC) will be crucial to observe during today’s monetary policy releases. In 1985, the agreement of G5 nations, known as the Plaza Accord, USD slipped down and Yen/USD changed from 240yen/$ to 200yen/$ at the end of 1985.
Bank of Japan (BoJ) Governor Kazuo Ueda explains reasons behind keeping interest rates intact at the December meeting while speaking at the post-policy meeting press conference on Thursday. The Bank expects the BOJ-NET to contribute to enhancement of financial services and user-friendliness of settlement systems, which lead to further development of financial markets in Japan. To this end, the Bank will continue to communicate with a wide range of relevant entities so that financial institutions can make effective use of the BOJ-NET. Looking ahead, the BOJ is likely to continue refining its monetary policy tools to address the evolving economic landscape. Innovations in financial technology, changes in global trade patterns, and demographic shifts within Japan all require how to day trade forex careful consideration in the BOJ’s policy formulation. The Bank of Japan faces a complex set of challenges as it navigates the current economic landscape.
Japan Interest Rate Decision
Increased market volatility or heightened uncertainty surrounding US-Japan trade relations could prompt the BoJ to delay its rate hike so as to buy more time to reassess its policy stance. Strengthening underlying price pressures in the Tokyo inflation data could feed into the nationwide inflation data next week, reinforcing expectations that the BoJ may act sooner. Additionally, headlines of broadening wage growth extending into 2025 also suggest that the conditions for a BoJ rate hike are increasingly being met. We want to clarify that IG International does not have an official Line account at this time. Therefore, any accounts claiming to represent IG International on Line are unauthorized and should be considered as fake. 71% of retail client accounts lose money when trading CFDs, with this investment provider.
- President Donald Trump’s tariff policy overshadow wage and price data showing Japan is making progress in durably achieving the BOJ’s 2% inflation target.
- The Bank of Japan (BoJ) holds a pivotal role in the global financial landscape as the central bank of the world’s fourth-largest economy.
- Concerns that a rate hike could spark a sharp sell-off, similar to July 2024, may contribute to investors’ hesitation.
- The stand-pat decision comes as domestic economic signals suggest further scope for raising interest rates in Japan even as the international landscape darkens and central banks elsewhere in the world mull the timing of rate cuts.
- Decisions made by the BOJ can lead to significant fluctuations in the yen’s value, impacting global markets, commodity prices, and foreign exchange rates.
The basis behind a potential rate move may stem from accelerating December Tokyo consumer inflation since October 2024. The headline Tokyo consumer price index (CPI) reached 3%—its highest level since October 2023—while the core CPI hit a four-month high at 2.4%. Generally, if the BoJ is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the JPY. Likewise, if the BoJ has a dovish view of the Japanese economy and keeps the ongoing interest rate, or cuts the interest rate it is negative, or bearish. It’s worth noting that the US Dollar Index (DXY) rallied the most since March the previous day after the US growth numbers impressed the greenback bulls.
March 2025 Events: Rate Decisions, Nvidia’s GTC & More
Japan’s biggest umbrella group for labor unions said last week that early results from annual wage talks were the most robust in 34 years, in a positive sign for personal spending. Meantime, the nation’s overall inflation rate sped up to 4% in January, the highest among Group of Seven economies. Headline inflation hit a two-year high of 4% in January as food prices continued to rise, adding to rising labour costs that are prodding firms to charge more for services. Federal Reserve, which is also expected to keep interest rates steady to watch how Trump’s planned April tariff hikes unfold.
- Despite some small glitches—for example, it turned out that the konjac powder mixed in the paper to prevent counterfeiting made the bills a delicacy for rats—the run was largely successful.
- Escalating the importance of today’s BoJ announcements is the quarterly BoJ Outlook Report and the latest chatters suggesting the Japanese central bank’s readiness for tweaking the Yield Curve Control (YCC) policy.
- The BoJ continually navigates economic challenges, striving to achieve price stability and sustained growth through the use of ultra-loose monetary policies and interest rates.
- You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
- Considering Japan’s long-standing deflation, the BoJ may want to remain dovish for now.
Sources have told Reuters the BOJ is leaning toward keeping interest rates steady next week as policymakers prefer to spend more time scrutinising overseas risks and clues on next year’s wage outlook. But BOJ policymakers appear to be in no rush to pull the trigger with the yen’s rebound moderating inflationary pressure and uncertainty surrounding U.S. president-elect Donald Trump’s policies clouding the economic outlook. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and cycle analytics for traders for any consequences that result.
In 1980, the BOJ reduced the official bank rate from 9.0% to 8.25% in August, to 7.25% in November, and to 5.5% in December in 1981. However, Japan tried to implement fiscal reconstruction at that time, so they did not stop their financial regulation. The bank’s organisational structure encompasses 15 departments at its main office, along with 32 branches and 14 local offices. Despite interruptions during World War II and the post-war Occupation period, the Bank of Japan underwent reorganisation in 1942 and 1949. The 1970s saw changes in its operating environment, aligning with Japan’s transition to a variable exchange rate and a more open economy.
The bank’s target inflation rate has been set at 2%, a figure that guides its policy decisions. The BoJ places a strong emphasis on independence and transparency in its operations. Immediate release of monetary policy decisions after MPMs, regular press conferences by the governor, and the publication of the Summary of Opinions and minutes contribute to transparency. Furthermore, the bank releases transcripts a decade later, providing insight into Policy Board decisions and reinforcing its commitment to openness. This multifaceted approach to communication aims to foster public understanding and confidence in the Bank of Japan’s monetary policies. Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve.
What is the BOJ?
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There are also two deputy governors, six members of the Policy Board, three or fewer auditors, “a few” counselors, and six or fewer executive directors heading the BOJ. All of these officers belong to the bank’s Policy Board, which is the Bank’s decision-making body. The Board sets currency and monetary controls, the basic principles for the Bank’s operations, and oversees the duties of the Bank’s officers, excluding auditors and counselors. The Policy Board includes the governor and the deputy governors, auditors, executive directors, and counselors.
What is the BoJ policy board?
The BOJ ended negative interest rates in March and raised its short-term policy target to 0.25 per cent in July. However, with criticism over past communication missteps—particularly during the July 2024 policy adjustment—BoJ officials will have to navigate carefully so as to avoid undesired market volatility. A surprise decision to hold rates steady at the upcoming meeting could trigger an initial sell-off in the Japanese yen, but that could be counterbalanced by a slightly hawkish tone from policymakers to mitigate the yen’s decline. In 1999, the BOJ started zero-interest-rate policy (ZIRP), but they ended it despite government opposition when the IT bubble happened in 2000. From 2003 to 2004, Japanese government did exchange intervention operation in huge amount, and the economy recovered a lot.
Until now there was enough bullishness surrounding domestic data that some 50% of surveyed analysts saw the earliest possible timing for a rate change coming at the next meeting. Bond traders were parsing Ueda’s remarks, given the steep upward trajectory in bond yields. Japan’s 30-year bond yields recently rose to the highest level since 2006 and benchmark 10-year yields this month hit the highest level since 2008. The Federal Reserve is expected to deliver two reductions this year beginning in September, holding steady for now when it makes its next rate decision later in the day, keeping the rate differential with Japan wide. A decision to stand pat will shift market attention to key data and events leading up to the January meeting. By contrast, Ueda may deliver dovish communication if the BOJ were to raise rates to convince markets that it won’t go on auto-pilot and instead tread carefully on further tightening.
For now the BOJ has some time for watching developments after last hiking the rate two months ago. With inflation trends staying more or less in line with the bank’s projections, most economists expect the bank to wait until June or July to raise its policy rate. The outlook for the global economy has taken a turn for the worse as Trump forges ahead with his tariff campaign. On Monday the OECD cut its world growth forecast to 3.1% for 2025 to account for disruptions to global commerce.
The author makes no representations as forex returns to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. The researcher sold classified material at a “very low price” to a foreign spy agency, authorities say. The Bank will encourage the uncollateralized overnight call rate to remain at around 0.5 percent. Following the passage of the Convertible Bank Note Regulations (May 1884), the Bank of Japan issued its first banknotes in (Meiji 18). Despite some small glitches—for example, it turned out that the konjac powder mixed in the paper to prevent counterfeiting made the bills a delicacy for rats—the run was largely successful.
A notable 0.3% upward revision to the previous 3Q gross domestic product (GDP) figure further indicates a supportive growth outlook, though concerns about persistent weakness in consumption remain a key area of caution. USD/JPY pares intraday losses during the five-day losing streak at the lowest level in a week ahead of the BoJ event. Escalating the importance of today’s BoJ announcements is the quarterly BoJ Outlook Report and the latest chatters suggesting the Japanese central bank’s readiness for tweaking the Yield Curve Control (YCC) policy. The decision marks the BOJ’s first rate hike since July and came just days after Donald Trump returned to the White House.
“While there might be factors we may not find out (about) until much later, there are factors we will know fairly soon such as changes in public sentiment,” Ueda said. “We’ll make sure not to be too behind the curve” in dealing with domestic inflation risks, he added. He offered few hints on the next rate-hike timing, but said the BOJ did not necessarily need to wait until everything is clear on the impact of US tariffs, in pulling the trigger. A key question for the BOJ is whether concerns about developments overseas might make it cautious enough to pause its rate hike path longer than the roughly six-month gap that BOJ watchers currently expect between each move. Ueda indicated little inclination to step into the market to stop the ascent, saying that now is not the time, while repeating the official stance that they’ll act if there are sudden moves.