Even with US Giant Step... Bank of Japan Likely to Continue Large-Scale Monetary Easing

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] The Bank of Japan (BOJ) will hold a monetary policy meeting on the 17th to announce its monetary policy direction. Despite the previous day’s 'Giant Step' (0.75 percentage point interest rate hike) by the U.S. Federal Reserve (Fed) and the Bank of England (BOE)’s 0.2 percentage point rate increase, it is expected to announce its intention to continue its 'solo monetary easing' policy.

According to the Nihon Keizai Shimbun and others on the 17th, the BOJ is conducting a two-day monetary policy meeting starting the previous day. Currently, Japan maintains a large-scale monetary easing policy that guides the short-term policy rate to minus 0.1% and the long-term interest rate to 0%.

NHK reported, "BOJ Governor Haruhiko Kuroda has repeatedly stated his intention to persistently continue large-scale monetary easing to support the economy and create a virtuous cycle that raises both wages and prices, and this policy is expected to be confirmed at this meeting."

Although Japan’s April Consumer Price Index (CPI) inflation rate has already risen to the 2% range targeted by the BOJ, the Nihon Keizai Shimbun reported that since the core factor was external elements such as rising energy prices, the current inflation level is not expected to persist, and the large-scale monetary easing policy will continue.

The BOJ’s stance is the exact opposite of major central banks such as those in the U.S., the U.K., and Europe. The Fed raised its benchmark interest rate by 0.75 percentage points the previous day and mentioned the possibility of an additional 0.50 to 0.75 percentage point hike in July. The European Central Bank (ECB) has also announced plans to raise rates next month for the first time in 11 years. The central banks of the U.K. and Switzerland also raised their benchmark rates by 0.25 percentage points and 0.5 percentage points, respectively, on the same day.

However, since the BOJ’s solo approach could further destabilize Japan’s exchange rate and bond markets, attention is focused on Governor Kuroda’s remarks regarding this. Concerning the recent yen weakness, which surpassed 135 yen per dollar reaching the highest level in over 20 years, Governor Kuroda expressed concern, stating it is "negative for the economy and undesirable."

This content was produced with the assistance of AI translation services.