"Japan BOJ Likely to Abolish Negative Interest Rate in First Half of Next Year"

YCC Policy Expected to End in October
Foreign Exchange Authorities Intervention Point at 150 Yen Range

Experts have predicted that the Bank of Japan (BOJ), which has maintained a large-scale monetary easing policy for the past decade, may abolish its negative (-) interest rate policy in the first half of next year.

Citizens are passing in front of the Bank of Japan (BOJ) headquarters located in Tokyo, Japan.
[Photo by Reuters Yonhap News]

On the 13th, Bloomberg reported that in a survey of 46 economists, half of the respondents answered this way. In a survey conducted last month, only 31% of respondents said the negative interest rate policy would end within the first half of next year.

However, all respondents expected no significant policy changes at the September monetary policy meeting scheduled for the 21st. Regarding the outlook for the yield curve control (YCC) policy, which artificially adjusts the fluctuation range of long-term interest rates, most experts answered that the BOJ is more likely to fully abolish the policy rather than modify it. Among them, 9% of respondents expected this to happen in October.

Experts foresee that the timing for ending the monetary easing policy will accelerate due to persistent inflation. Japan's consumer price inflation rate has exceeded the BOJ's 2% inflation target for 12 consecutive months since August last year, maintaining a level in the 3% range. Moreover, with the prolonged Yen depreciation, the cost of importing energy and raw materials has increased, and inflation is expected to accelerate further in the second half of the year.

As the tightening cycles of major central banks enter their final stages, if the BOJ also halts its monetary easing stance, pressure on the weak yen is expected to ease.

Meanwhile, experts predict that foreign exchange intervention due to the weak yen will occur around the 150 yen per dollar level. On this day, the dollar-yen traded at 147.23 yen in the Tokyo foreign exchange market. The yen-dollar exchange rate, which surpassed the 147 yen level since early September, fell to the 146 yen level after hawkish (monetary tightening-preferred) remarks by BOJ Governor Kazuo Ueda but recovered above the 147 yen line within a day.