Boj Keeps Interest Rate Unchanged

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Boj Keeps Interest Rate Unchanged

BoJ Keeps Interest Rate Unchanged, Adjusts The YCC

The Bank of Japan decided not to touch its interest rate policy at all, which was in accordance with the forecast. However, the central bank changed its expression for the yield curve control policy. Furthermore, the BoJ made a forecast that sees inflation at high levels even in 2024 and 2025.

After the BoJ's decision, the interest rate (short term) remains unchanged near -0.1%. However, the key change was the bank's statement about using the -1% as the upper end of the band for any operations carried out in the market.

More Flexible YCC Policy

This change is a sign that the Bank of Japan is not as strict with its YCC policy as compared to the past. In the near future, the central bank will likely be a lot more flexible in this regard as well.

As per the statement from BoJ, the financial markets and the major economies around the world, including Japan, face multiple headwinds. At the same time, the uncertainty is at record-high levels, which requires the central bank to adopt a more flexible approach in regard to the YCC.

Right now, the effective range for the Japanese government bonds (10Y) is -1% - 1%. In addition, no change is made to the interest rates, so they are the same as before.

Another thing that was clarified after the BoJ's meeting is that the bank will continue its policy of quantitative easing along with asset purchasing.

It appears that the central bank of Japan is struggling to find the balance between preventing the Yen's weakness and supporting the economy. At the same time, persistently high inflation is also becoming a problem for the central bank.

After the announcement by the BoJ, the Japanese Yen (JPY) turned lower by 0.5% against the greenback. At the same time, the yields on the 10-year bonds also lost some of their ground.

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