The Bank of Japan is largely expected to keep interest rates steady at the end of its two-day meeting that ends on June 14, 2024. Shown here is the Japanese flag flying high at the Bank of Japan's headquarters in Tokyo.
Kazuhiro Noji | AFP | Getty Images
The Bank of Japan left its benchmark interest rate unchanged on Friday, but indicated it was considering reducing its purchases of Japanese government bonds.
The central bank left short-term interest rates unchanged at between 0% and 0.1% at the end of the two-day policy meeting, as was widely expected.
However, it is worth noting that the bank said in its statement that it may reduce its purchases of Japanese government bonds after the next monetary policy meeting scheduled to be held on July 30 and 31.
The resolution passed by a vote of 8-1, with board member Nakamura Toyoaki dissenting.
Toyuki was in favor of reducing Japanese government purchases, but believes that the Bank of Japan should decide to reduce them only after reassessing developments in economic activity and prices in the July 2024 outlook report, scheduled for release on July 31.
Before the next meeting, the Bank of Japan said it will gather views from market participants and decide on a detailed plan to reduce the purchase amount over the next one or two years.
Purchases of Japanese government bonds, commercial paper and corporate bonds will also continue as decided at the March monetary policy meeting.
After the Bank of Japan's decision, the Japanese yen fell by 0.52% to 157.84 against the US dollar, while the return on the Japanese yen rose by 0.52% to 157.84 against the US dollar. 10 years JGB It fell 44 basis points to 0.924.
Indicator Nikki 225 The Topix index rose by 0.68%, recovering from its previous losses, while the Topix index rose by 0.71%.
Bold political moves
In March, the Bank of Japan raised interest rates for the first time in 17 years — ending the world's last negative interest rate regime — and scrapped its yield curve control policy in a radical policy move.
However, the central bank said at the time that it would continue to buy Japanese government bonds at a pace of about 6 trillion yen ($38.17 billion) per month.
While large-scale purchases of Japanese government bonds had the effect of stabilizing 10-year Japanese government bond yields at around 1%, they indirectly put additional downward pressure on the weak yen, according to a note from consultancy Teneo published in June 13.
On May 8, Bank of Japan Governor Kazuo Ueda said the central bank would scrutinize the yen's recent declines in guiding monetary policy, according to a Reuters report.
It came after yen The currency fell to its lowest level in 34 years, trading at 160 to the dollar in late April, prompting the Bank of Japan to intervene to support the currency.
“A unilateral sharp decline in the yen negatively affects the economy and is therefore undesirable” because it makes it difficult for companies to make business plans, Ueda told parliament.
“If currency fluctuations affect or risk affecting the inflation trend, the Bank of Japan must respond with monetary policy,” he added.
