BOJ Decides to Maintain Easing Policy... "High Uncertainty Surrounding Japan's Economy"

The Bank of Japan (BOJ) decided on the 22nd at its Monetary Policy Meeting to maintain its large-scale monetary easing policy as is.

Bank of Japan (BOJ)

According to the Nihon Keizai Shimbun, the BOJ announced after concluding the Monetary Policy Meeting held from the 21st that it would continue its accommodative monetary policy. Nine policy board members, including BOJ Governor Kazuo Ueda, reached a consensus to keep the monetary policy unchanged.

Accordingly, the short-term interest rate will be held steady at -0.1%, and the Yield Curve Control (YCC) policy, which artificially controls the upper limit of the 10-year government bond yield as a long-term interest rate indicator, will be maintained. The policy decided at the July Monetary Policy Meeting to effectively expand the fluctuation range ceiling of the 10-year bond yield to 1% will also be upheld. 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 said, "Recent government economic measures have reduced the pace of price increases," but also noted that "the expected inflation rate is showing signs of expanding again."

The BOJ judged that although Japan's current inflation rate exceeds the BOJ's target of 2%, significant uncertainties surrounding the Japanese economy remain high. It pointed to global economic recession, international raw material prices, and corporate wage issues as uncertain factors.

The Nihon Keizai explained, "It appears that the BOJ judged that maintaining the easing policy is necessary to respond promptly to these uncertainties and to sustain a stable inflation rate in the 2% range."

With the BOJ expressing its intention to continue the easing policy, the value of the yen is expected to decline further. The yen-dollar exchange rate surpassed 148 yen per dollar the previous day. As the U.S. Federal Reserve (Fed) signaled additional rate hikes within the year, long-term interest rates rose, widening the interest rate gap between the U.S. and Japan, increasing selling pressure on the yen. As of 2:10 p.m., the dollar was trading at 147.94 yen in the Tokyo foreign exchange market.