Bank of Japan Unanimously Votes to Leave Interest Rates in Negative Territory

Bob Mason
Published: Sep 22, 2023, 03:26 GMT+00:00

The Bank of Japan left monetary policy ultra-loose this morning, with no changes to the Yield Curve Control policy or interest rates.

Bank of Japan

In this article:


  • The Bank of Japan left interest rates in negative territory today.
  • There was no further tweak to the Yield Curve Control Policy.
  • Investor focus now turns to the Bank of Japan press conference.

Bank of Japan Leaves Interest Rates in Negative Territory

On Friday, the Bank of Japan left interest rates at -0.10%. The hold on interest rates came despite recent discussions of a move away from negative rates. Bank of Japan Governor Ueda recently discussed the need for wage growth and consumption to fuel demand-driven inflationary pressures before considering a shift in interest rates.

The hold on interest rates at -0.10% shifted the market focus to the Monetary Policy Statement.

Salient points from the Monetary Policy Statement included,

  • The Board unanimously voted in favor of leaving the short-term policy interest rate at -0.10%.
  • Unanimously, the Board voted to allow 10-year JGB yields to within a +/- 0.5 percentage point range.
  • The Bank will conduct Yield Curve Control (UCC) policy with greater flexibility as before.

Macroeconomic Conditions

  • Japan’s economy has recovered moderately, supporting employment and wage growth.
  • Private consumption has increased at a moderate pace despite elevated price levels.
  • Inflation expectations have shown upward movements again.
  • Japan’s economy is likely to continue recovering moderately over the near term.
  • The Board expects the annual inflation rate to decelerate over the near term.

USD/JPY Reaction to the Bank of Japan Decision

Before the Bank of Japan’s monetary policy decision, the USD/JPY fell to a pre-BoJ low of 147.496 before rising to a high of 147.794.

However, in response to the BoJ interest rate decision and Monetary Policy Statement, the USD/JPY fell to a low of 147.955 before rising to a high of 148.105.

At the time of writing, the USD/JPY was up 0.34% to 148.072.

USD/JPY 3-Minute Chart shows USD/JPY response to the BoJ policy hold.
220923 USDJPY 3 Minute Chart

Bank of Japan Press Conference to Garner Investor Interest

There will be more investor interest than usual in the Bank of Japan press conference. After holding rates unchanged, comments relating to a move away from negative rates will influence the USD/JPY pair.

However, the BoJ needs to spell out the conditions under which the Board would vote in favor of a move away from ultra-loose monetary policy. USD/JPY sensitivity to the press conference will hinge on references to a move away from negative interest rates.

The US Session

While the Bank of Japan was the focal point this morning, Fed monetary policy will be a talking point this afternoon. After the better-than-expected US jobless claims, the prelim US service sector PMI for September will garner interest.

Economists forecast the US Services PMI to increase from 50.5 to 50.6 in September.

A pickup in service sector activity would fuel further bets on a November Fed rate hike. The US services sector contributes over 75% to GDP. Higher interest rates would impact labor market stability and wage growth. Softer wage growth would ease consumption and demand-driven inflationary pressures.


About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

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