BOJ Holds Interest Rates Steady... "Possibility of Rate Hike in Second Half Increases"

Yujiin Investment & Securities analyzed on the 17th that the Bank of Japan (BOJ) confirmed an additional normalization stance with its decision to keep interest rates unchanged, increasing the possibility of a rate hike in the second half of the year.

Earlier, the BOJ held its June Monetary Policy Meeting over two days until the 14th (local time) and decided to keep the policy rate steady at 0.0~0.1%, while signaling a future reduction in the scale of government bond purchases.

Economist Lee Jeong-hoon noted, "According to Governor Ueda, tapering will begin immediately after the July meeting and there is a possibility of a substantial reduction," adding, "Furthermore, he mentioned that the existing exchange rate significantly impacts the economy and prices, accelerating inflation, thereby reversing the previous stance from early May that the exchange rate rise was negligible."

He continued, "Although a cautious stance still predominates, it is significant that the additional normalization stance has been confirmed," emphasizing, "The Japanese economy’s momentum has weakened considerably since the second half of last year, but corporate sentiment remains relatively favorable. On the other hand, rising import prices due to the yen’s depreciation are deepening household consumption sluggishness."

He added, "Inflation is still maintaining the 2% range, and the burden from the yen’s weakness is also expanding," concluding, "The possibility of additional rate hikes in the second half of the year has increased."

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