The Bank of Japan Leaves Interest Rates Unchanged in Unanimous Vote

The Bank of Japan Leaves Interest Rates Unchanged but Cuts Bond Purchases

On Friday (June 14), the Bank of Japan left interest rates unchanged.

According to the Statement on Monetary Policy,

• The Policy Board of the Bank of Japan voted unanimously to encourage the uncollateralized overnight call rate to remain at around 0% to 0.1%.
• The Policy Board, in an 8-1 majority vote, decided it would reduce JGB purchases to allow long-term interest rates to form more freely.
• At the next Monetary Policy Meeting, the BoJ will release a detailed plan for reducing JGB purchases during the next one to two years.
• Japan’s economy has recovered modestly, though weakness persists.
• Exports and industrial production have been flat.
• Corporate profits have improved, with business fixed investments trending higher.
• Labor market conditions and wage growth have improved.
• Private consumption has been resilient, though price rises have continued.
• The inflation rate has been in the 2.0-2.5% range, with services prices rising in response to higher wages.

USD/JPY Reaction to the BoJ Monetary Policy Decision

Before the BoJ monetary policy decision, the USD/JPY fell to a low of 156.932 before rising to 157.262.

In response to the BoJ monetary policy decision, the USD/JPY fell to a low of 156.794 before surging to 157.978.

On Friday (June 14), the USD/JPY was up 0.51% to 157.786.

Up Next

Investors should monitor for Bank of Japan comments following the monetary policy decision. Views on Yen weakness, inflation, and interest rates could further influence buyer demand for the USD/JPY.

Later in the session on Friday, the US economic calendar will be in the spotlight. The Michigan Consumer Sentiment Index will attract investor attention.

Economists forecast the Michigan Consumer Sentiment Index to increase from 69.1 to 72.0 in June. Beyond the headline numbers, investors should consider the Michigan Inflation Expectations Index after the recent US inflation figures and more hawkish FOMC economic projections.

Furthermore, FOMC Member commentary also needs consideration. FOMC Member Austan Goolsbee is on the calendar to speak. Comments regarding inflation and the timing of an interest rate hike could move the dial.