- The Bank of Japan is expected to maintain interest rates at 0.50% on Wednesday.
- Attention will focus on the slopes of the BOJ on the moment and reach of future rates of rates.
- The Japanese yen is expected to be affected by the volatility induced by the Boj’s policy ads.
The Bank of Japan (BOJ) is on the way to maintaining the stable short -term interest rate at 0.50% after its two -day monetary policy review in March on Wednesday.
Any signal on the moment and scope of future rates of rates by the BOJ will probably infuse intense volatility around the Japanese yen (JPY).
What to expect from the decision about the Boj’s interest rate?
It is widely expected that the Boj Pause its cycle of rates ups this month after raising its 0.50%policy rate, the highest level in 17 years, from 0.25%in January, under the premise that Japan was advancing towards the achievement of its 2%inflation target.
Just before the BOJ’s policy meeting in January, the US president, Donald Trump, returned to the White House and proceeded with the proposed tariffs on China, Canada and Mexico. Trump’s protectionism has triggered a global tariff war, putting the main central banks of the world in a dilemma.
Although the growing inflationary pressures globally due to Trump’s tariff initially reported.
Despite the growing concerns about the commercial war and the economic slowdown, the governor of the Boj, Kazuo Ueda, and his colleagues continued to insinuate more rates of rates if inflation moves sustainably towards its objective of 2%.
“Long -term interest rates are moved by several factors. But the greatest determinant is market forecast on the perspective of our short -term policy rate,” said Uea to Parliament on March 12, emphasizing the determination of the bank to continue increasing short -term interest rates.
This narrative seems to be supported by the fact that inflation in Japan remains at its highest level since January 2023. The National Annual Consumer Price Index (IPC) jumped 4% in January from 3.6% in December. The so-called “Core-Core” inflation rate, which excludes fresh food and energy prices and is closely monitored by the BOJ, increased slightly to 2.5% in the same period from 2.4% of the previous month.
In addition, the yields of the government bonds 10 years of the country recently fired at their highest level since October 2008, anticipating greater inflationary pressures. At the same time, the Japanese Yen (JPY) reached five months against the US dollar (USD).
Moreover, the average monthly spending of households in Japan increased 0.8% year -on -year (yoy) in real inflation adjusted terms in January, marking the second consecutive month of growth.
The high cost of living brings greater scrutiny about the initial result of the spring salary negotiations (Shunto) announced on Friday. The first round data of the largest union group in Japan, Rengo, show an average salary increase of 5.46% for fiscal year 2025, compared to the demand for an increase of 6.09%. However, the results exceeded the 5.28% increase last year.
These factors continue to raise the expectations of rates of rates by the Japanese Central Bank in the coming months. The latest Bloomberg survey to economists showed that “Julio is still the favorite option for the next climb, with 48% waiting for a movement then, lowering 56% in the previous survey.”
BBH analysts said: “The two -day meeting of the Bank of Japan ends Wednesday with a widely expected pause. The bank has just increased rates at 25 bp at the last meeting of January.”
“The governor of the Boj, Ueda, has warned that the trajectory of the policy will be guided by the verification of the impact of the increases of rates already made, which argues against rises of consecutive rates. The swap market is assessing the next increase of 25 bp by September,” the analysts added.
How could the decision on the interest rate of the Bank of Japan to the USD/JPY affect?
If the BOJ reiterates that it will remain dependent on the data and decide based on each meeting, it is likely that the Japanese yen resume its recent bearish momentum against the US dollar (USD), leading to the USD/JPY back to the maximum of March 151.31.
On the contrary, the USD/JPY could drastically fall around 146.50 in a new jpy rebound if the Boj debates the next rise in rates as soon as in May due to concerns about the inflationary pressure of salary increases, the persistent increases in food costs and the impact of the commercial war.
Citing a source familiar with the thought of the Boj, Reuters reported last week: “Japan’s economy and price developments seem to be on their way, but risks abroad have increased.” “The growing global uncertainty is a concern and could affect the moment of the rise in the Boj’s rates,” said the source, an opinion backed by two other sources.
However, any immediate reaction to BOJ’s policy ads could be reversed once the Governor Ueda addresses the press conference after the policy meeting at 6:30 GMT.
From a technical perspective, Dhwani Mehta, leading analyst of the Asian session at Fxstreet, points out: “The USD/JPY seems to be at a critical crossroads, exposed to risks in both directions in the prelude to the Boj’s prelude. The pair has recovered the simple mobile average (SMA) of 21 days in 149.14, but the relative force index (RSI) of 14 days is maintained below 50 Despite the recent rebound. “
“A hard line pause of the BOJ could reactivate the bearish trend of the USD/JPY, aiming at the minimum of March 13, 147.41. The following support is seen on the threshold of 147.00. A sustained rupture below that level would challenge the minimum of five months of 146.54. On the contrary, buyers need acceptance above the psychological level of 150.00 Maximum of March 151.31.
Economic indicator
BOJ interest rates
He Bank of Japan Set the interbank interest rate. This rate affects a range of interest rates set by commercial banks, construction societies and other institutions towards their own savers and borrowers. It also affects the price of financial assets, such as bonds, actions and exchange rates, which affect the consumer and the demand for businesses in a variety of forms. If the Bank of Japan has a firm perspective with respect to the Japanese economy and increases the current interest rate, this is upward to the YEN. Instead, a slight perspective that leads to the bank to reduce or maintain current types will be bassist for the YEN.
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Next publication:
MIÉ MAR 19, 2025 03:00
Frequency:
Irregular
Dear:
0.5%
Previous:
0.5%
Fountain:
Bank of Japan
FAQS Central Banks
Central banks have a key mandate that consists in guaranteeing the stability of prices in a country or region. Economies constantly face inflation or deflation when the prices of certain goods and services fluctuate. A constant rise in the prices of the same goods means inflation, a constant decrease in the prices of the same goods means deflation. It is the Central Bank’s task to keep the demand online by adjusting its interest rate. For larger central banks, such as the US Federal Reserve (FED), the European Central Bank (ECB) or the Bank of England (BOE), the mandate is to maintain inflation about 2%.
A central bank has an important tool to raise or lower inflation: modify its reference interest rate. In precommunicated moments, the Central Bank will issue a statement with its reference interest rate and give additional reasons of why it maintains or modifies it (cut it or the SUBE). Local banks will adjust their savings and loan rates accordingly, which in turn will make it difficult or facilitate that citizens obtain profits from their savings or that companies ask for loans and invest in their businesses. When the Central Bank substantially rises interest rates, there is talk of monetary hardening. When it reduces its reference rate, it is called monetary relaxation.
A central bank is usually politically independent. The members of the Central Bank Policy Council go through a series of panels and hearings before being appointed for a position in the Policy Council. Each member of that council usually has a certain conviction on how the Central Bank should control inflation and the consequent monetary policy. Members who want a very flexible monetary policy, with low types and cheap loans, to substantially boost the economy, while comprising with inflation slightly greater than 2%, are called “pigeons.” Members who prefer higher types to reward savings and want to control inflation at all times are called “hawks” and will not rest until inflation is located at 2% or just below.
Normally, there is a president who directs each meeting, has to create a consensus between the hawks or the pigeons and has the last word when the votes must be divided to avoid a draw to 50 on whether the current policy must be adjusted. The president will pronounce speeches, which can often be followed live, in which he will communicate the current monetary position and perspectives. A central bank will try to boost its monetary policy without causing violent oscillations of the fees, the actions or their currency. All members of the Central Bank will channel their position towards the markets before a monetary policy meeting. A few days before a monetary policy meeting is held and until the new policy has been communicated, the members are prohibited from speaking publicly. It is what is called a period of silence.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
