Boj Expected To Keep Its Policy Of Ultralow Rates

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Boj Expected To Keep Its Policy Of Ultralow Rates

BOJ Expected To Keep Its Policy Of Ultra-Low Rates

Despite a leadership change, the Bank of Japan (BOJ) will likely continue its current monetary policy of ultra-low rates. In addition, the forecast regarding Japan points towards an economic recovery due to the support from household and corporate spending.

According to experts, the BOJ will also signal the inflation overshoot problem, which would lead to a change in the price projections. This upgrade will likely happen during July at the quarterly review.

Inflation Will Not Lead To Rate Hikes

If we look around, a jump in inflation also triggers rate hikes, but it appears Japan is on a different path. That's why even if we get an upgrade on the inflation target, the chance of a rate hike in Japan is very slim to none.

Recently, BOJ Governor Kazuo Ueda reiterated the need to keep the current ultra-loose policy to ensure that wage growth is in line with the price rises.

In his speech at the parliament, Ueda also talked about how the price-setting behavior in the corporate sector is showing signs of a change that could drive inflation higher.

The BOJ thinks that consumption appears to be strong which is helping in underpinning the Japanese economy. However, the Bank of Kapan must continue to support the economy to activate the 2% inflation target.

That's why the chances of no change in the BOJ interest rate policy are highly likely. At the upcoming meeting, the BOJ will maintain the interest rate of -0.1% without any changes.

As for the exports from Japan, the BOJ may downgrade the forecasts considering the weaker demand from China and USA.

But the overall theme suggests that BOJ will likely stick with its current policy to ensure that a moderate recovery becomes a possibility in the world's third-largest economy.

Earlier, the markets were hopeful that a change in the BOJ leadership will also lead to a change in the BOJ policies. But it appears that even Ueda is willing to continue with the old policies to achieve results.

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