BOJ Decides to Maintain Easing Policy... "Difficult to Be Confident in Wage-Price Virtuous Cycle"

BOJ Maintains Negative Interest Rates
Inflation and Personal Consumption Gradually Recover
Economic Uncertainties Persist
Yen-Dollar Exchange Rate Surges to 143 Yen Range Temporarily

The Bank of Japan (BOJ) decided to maintain its current monetary easing policy at the monetary policy meeting held on the 19th. Although corporate business conditions and prices have improved moderately, the BOJ cited high domestic and international uncertainties surrounding the Japanese economy as the reason for being unable to guarantee sustained inflation.

Bank of Japan
Photo by Reuters Yonhap News

According to the Nihon Keizai Shimbun, the BOJ announced after concluding the monetary policy meeting that began on the 18th that it would stick to its monetary easing policy.

Accordingly, the BOJ will keep the short-term interest rate at -0.1% and continue the Yield Curve Control (YCC) policy, which artificially manipulates the upper limit of the 10-year government bond yield, a long-term interest rate indicator. The policy from the October monetary policy meeting to tolerate long-term interest rates exceeding 1% depending on financial market conditions will also be maintained. Measures to increase the money supply by purchasing index-linked Exchange-Traded Funds (ETFs) will continue as well.

In a statement released after the monetary policy meeting, the BOJ explained that "corporate profits and capital investment are improving," indicating that the current Japanese economy is on a moderate recovery path.

Regarding inflation, which the BOJ has set as a prerequisite for monetary easing, it assessed that "although the rate of increase has slightly decreased recently, inflation is growing in the 3% range due to the impact of rising import prices," and "employment and income have also improved, leading to a moderate increase in personal consumption." Japan's Consumer Price Index (CPI) has exceeded the BOJ's inflation target of 2% for 15 consecutive months, maintaining growth in the 3% range.

However, the BOJ still judged that domestic and international uncertainties surrounding the Japanese economy remain high. Factors such as rising international raw material prices and global economic trends pose risks to the economy and prices. The Nihon Keizai Shimbun explained, "Due to these factors, the BOJ believes it will take time to determine whether a virtuous cycle where wage increases lead to sustained inflation can continue."

Meanwhile, with the BOJ showing no signs of policy changes such as abolishing negative interest rates at this year's final monetary policy meeting, the yen's value against the dollar plunged sharply. The yen-dollar exchange rate, which had fallen to the 141-yen range in mid-month, surged to 143.68 yen shortly after the BOJ's monetary policy meeting results were announced at 11:57 a.m. On the Tokyo foreign exchange market, as of 2:17 p.m., the yen was trading at 143.47 against the dollar.

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