No Change in Policy, but BOJ Policymakers ‘Will Not Hesitate’ to Act if Necessary

“The Bank will not hesitate to take additional easing measures if there is a greater possibility that the momentum towards achieving the price stability target will be lost,” it added.
James Hyerczyk
Bank of Japan

The Dollar/Yen is trading lower on Tuesday after the Bank of Japan kept its ultra-low short-term interest rate target at -0.10%. The BOJ also left its guidance on interest rates unchanged, and said it intends to keep rates where they are through at least next spring. But the central bank added that it “will not hesitate” to make adjustments if necessary.

The BOJ slightly downgraded its inflation outlook to 1.0 percent for the year to March 2020 and 1.3 percent for the following year, compared with previous forecasts for 1.1 percent and 1.4 percent respectively.

The new inflation figures again fell far short of the two percent inflation that the BOJ has long set as its target – a figure seen as key to firing up the world’s third largest economy – despite a plethora of stimulus attempts and monetary easing packages over the years.

BOJ policymakers said they would continue to monitor “downside risks to economic activity and prices, mainly regarding developments in overseas economies” after their two-day meeting finished on Tuesday.

“The Bank will not hesitate to take additional easing measures if there is a greater possibility that the momentum towards achieving the price stability target will be lost,” it added.

Recently, BOJ Governor Haruhiko Kuroda argued that prolonged periods of low growth and low inflation have created a “deflation mindset” that continues to weigh on the national economy. He further added that Japan’s economy has been on “a moderate expanding trend”.

Investor Expectations

The price action in the Japanese Yen suggests that some speculators were betting on a more dovish Bank of Japan. However, the central bank didn’t fool the professionals. Ahead of the release of its monetary policy statement, “Some 81% of 47 economists surveyed by Bloomberg see the BOJ sticking with its current policy setting at the meeting, while 19% predict additional easing.”

Additionally, a large number of analysts thought the BOJ would want to conserve its scarce firepower for now. About a third of polled analysts expected the central bank to strengthen its pledge to keep rates at extremely low levels at the meeting.

Bloomberg economists said, “We think the BOJ will adopt a wait-and-see strategy ahead of the Federal Reserve’s decision on July 31… The BOJ’s latest growth and inflation outlook and any tweaks to its forward guidance will be a focus.”

The economists may have been right, but it all depends on whether you think “adopt a wait-and-see strategy” means the same at the central bank saying it “will not hesitate” to make adjustments if necessary.

Don't miss a thing!

Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All
IMPORTANT DISCLAIMERS
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
RISK DISCLAIMER
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.
FOLLOW US