- The Bank of Japan is prepared to keep stable interest rates at 0.50% on Tuesday.
- The approach will be in the BOJ JGB purchase reduction plan, as well as in any indication on the time of the next rate rise.
- Boj’s policy ads are expected to significantly impact Japanese yen.
It is widely expected that the Bank of Japan (BOJ) leaves the short -term interest rate without adjusting to 0.5% after the end of the two -day monetary policy review in June on Tuesday.
In the absence of quarterly economic projections, all eyes will be put in the Boj’s plans on the reduction of their purchases of Japanese government bonds (JGB) and in the indications on the time of the next rise in interest rates. BOJ’s policy ads will probably generate volatility around Japanese yen (JPY).
What to expect from the decision about the Boj’s interest rate?
The BOJ is prepared to extend the pause in its rate upload cycle for the third consecutive month in June, maintaining the policy rate at the highest level in 17 years.
In its policy meeting from April 30 to May 1, the Japanese Central Bank remained in its rhetoric that “interest rates will continue to raise the economy and prices move in line with projections.”
The bank also referred to the most volatile perspective due to the US trade policy: “Uncertainty about the impact of tariffs on the economy is still high even after tariffs are finished.”
Since then, commercial tensions have relieved, thanks to the truce between the US and China and the prospects for US trade agreements with Japan and the European Union (EU).
“If commercial negotiations between countries advance and uncertainty about commercial policies decrease, foreign economies will resume a path of moderate growth. That, in turn, will accelerate the economic growth of Japan,” Ueda said in a speech earlier this monthkeeping the hopes of another rise in rates for the end of the year.
Therefore, the markets expect the head of the BOJ, Ueda, to lean slightly towards a hard line posture when talking about the perspectives of interest rates during the press conference after the policy meeting at 6.30 GMT.
In addition, concerns about the persistent food inflation, especially due to rice costs, a basic food in Japan, could lead Uda to transmit a hard line message.
“Japan is now experiencing a second round of food prices inflation driven by supply shocks, adding an inflationary impulse of higher wages,” said Ueda previously.
The Underlying Consumer Price Index (CPI) Inflation of 2% of the BOJ For more than three years and reached a maximum of more than two years of 3.5% in April, due in large part to a 7% increase in food prices, according to Reuters.
Apart from the communication of the BOJ on the next movement of interest rates, the markets will also closely examine the evaluation of the Central Bank on the current JGB purchase reduction plan of 400,000 million JPY per quarter.
According to a report published by the Nikkei Asian Review last Saturday, the BOJ is considering reducing the quarterly reduction rate in its JGB purchases to 200,000 million JPY (1.4 billion dollars) from April 2026.
The BOJ reduction plan is expected to have the support of the majority of the members of the Policy Board, the Nikkei added.
The possible reduction of the Central Bank’s reduction plan remains critical in the light of the recent agitation in the bond market, when the yields of the JGB at 40 years reached historical maximums.
How could the decision on the interest rate of the Bank of Japan affect USD/JPY?
The USD/JPY continues to be quoting in a 250 pip family range around 144.00 in the prelude to the risk of the Boj event.
If the BOJ maintains its rhetoric to depend on the data and follow a meeting approach by meeting for a politics movement, the Japanese Yen (JPY) could be under intense sale pressure against the US dollar (USD), taking the USD/JPY back to the static resistance of 146.50.
On the contrary, the USD/JPY could resume its downward trend around 142.00 if the BOJ expresses concerns about persistent increases in food costs and recognizes the decrease in commercial tensions. The hard line inclination of the BOJ could increase the probabilities of another rise in rates by the end of this year, triggering a new jpy rebound.
Any great reaction to the Boj’s policy ads could be temporary, since the Press Conference of the Governor UDA could inject new volatility around the couple.
From a technical perspective, Dhwani Mehta, leading analyst of the Asian session at FXSTERET, points out: “The current market position suggests that the USD/JPy is still exposed to risks in both directions before the box’s decision. The torque is fighting against the confluence of the simple mobile average (SMA) of 21 days and the 50 -day SMA near the region of 144.00 (RSI) of 14 days challenging the midline to recover the upward territory. “
“A hard line maintenance of the BOJ could provide a new boost to the downward trend of the USD/JPY, with the strong support area about 142.50 probably at risk. The next support is seen in the minimum of April 29 around 142.00. A decisive movement below that level will point to the psychological brand of 140.00. On the contrary, buyers need acceptance above the round level of 145.00 Reactivate the upward trend towards the maximum of May 29, 146.29.
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:
Mar Jun 17, 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.
