Bank of Japan (BoJ) Governor Kazuo Ueda explained the reasons behind maintaining the key interest rate at 0.50% during the March meeting in his press conference on Wednesday.
The Japanese Yen is losing further ground against the US Dollar, driving USD/JPY 0.39% higher on the day toward 150.00, as of writing.
Uncertainties surrounding Japan's economy and prices, including global trade policy trends, remain high.
Must pay due attention to FX markets, their impact on Japan's economy, and prices.
Will keep adjusting degree of easing if our economic, price outlook is to be realised.
Will keep scrutinising impact of the US trade policy on us, global, Japan's economy.
Underlying inflation is gradually nearing 2%, and that has allowed us to gradually adjust the degree of monetary easing.
Not in stage of quantitiatively eavualute overseas uncertainties.
Wage trends 'on track' or slightly stronger.
Still haven't narrowed down what the neutral rate is.
Want to conduct policies before it is too late when asked about tariff impacts.
Will respond nimbly if there is abnormal long-term yield moves.
The Bank of Japan (BoJ) holds a press conference at the end of each one of its eight scheduled policy meetings. At the press conference the Governor of the BoJ communicates with media representatives and investors regarding monetary policy. The Governor talks about the factors that affect the most recent interest rate decision, the overall economic outlook, inflation, and clues regarding future monetary policy. Hawkish comments tend to boost the Japanese Yen (JPY), while a dovish message tends to weaken it.
Read more.Next release: Wed Mar 19, 2025 06:30
Frequency: Irregular
Consensus: -
Previous: -
Source: Bank of Japan
This section below was published on March 19 at 02:28 GMT to cover the Bank of Japan's monetary policy announcements and the initial market reaction.
The Bank of Japan (BoJ) announced on Wednesday that it maintained the short-term interest rate target in the range of 0.40%- 0.50% after concluding its two-day monetary policy review meeting.
The decision aligned with the market expectations.
The Japanese central bank stood pat after delivering a 25 basis points (bps) interest rate hike to 0.50% in January.
Japan's economy recovering moderately, albeit with some weak signs.
Consumption increasing moderately as a trend.
Inflation expectations heightening moderately.
Must be vigilant to impact of financial, FX market moves on Japan's economy.
Expect underlying inflation to converge towards level consistent with our price target in latter half of 3-year period projected under quarterly outlook report.
Exports, output moving sideways.
Japan's economy likely to continue growing above potential.
Uncertainty surrounding japan's economy, prices remains high.
Risks include trade policy of each country and its impact on overseas economies, prices.
USD/JPY stays little changed in an immediate reaction to the Bank of Japan's (BoJ) steady policy outcome. The pair is currnetly trading flat on the day near 149.35.
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the New Zealand Dollar.
USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
---|---|---|---|---|---|---|---|---|
USD | 0.04% | 0.03% | 0.03% | 0.03% | -0.03% | 0.06% | 0.00% | |
EUR | -0.04% | -0.01% | 0.00% | -0.01% | -0.06% | 0.03% | -0.03% | |
GBP | -0.03% | 0.01% | 0.02% | 0.00% | -0.04% | 0.04% | -0.03% | |
JPY | -0.03% | 0.00% | -0.02% | -0.02% | -0.06% | 0.00% | -0.03% | |
CAD | -0.03% | 0.01% | -0.00% | 0.02% | -0.04% | 0.06% | -0.04% | |
AUD | 0.03% | 0.06% | 0.04% | 0.06% | 0.04% | 0.08% | 0.06% | |
NZD | -0.06% | -0.03% | -0.04% | -0.01% | -0.06% | -0.08% | -0.07% | |
CHF | -0.01% | 0.03% | 0.03% | 0.03% | 0.04% | -0.06% | 0.07% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
This section below was published on March 18 at 23:00 GMT as a preview of the Bank of Japan Interest Rate Decision.
The Bank of Japan (BoJ) is on track to keep the short-term interest rate steady at 0.50% following its two-day March monetary policy review on Wednesday.
Any signals on the timing and the scope of future rate hikes by the BoJ will likely infuse intense volatility around the Japanese Yen (JPY).
The BoJ is widely expected to pause its rate-hiking cycle this month after raising its policy rate to 0.50%, the highest level in 17 years, from 0.25% in January on the view that Japan was progressing toward achieving its 2% inflation target.
Just before the BoJ’s January policy meeting, US President Donald Trump returned to the White House and proceeded with the proposed tariffs on China, Canada and Mexico. Trump’s protectionism has triggered a tariff war globally, throwing major central banks worldwide in a dilemma.
Though rising inflationary pressures globally due to Trump’s tariff could be a boon for the BoJ hawks, policymakers remain wary of Japanese economic prospects after the final Gross Domestic Product (GDP) increased 0.6% on a quarterly basis in the fourth quarter of 2024, a slower pace than the 0.7% expansion initially reported.
Despite escalating trade war and economic slowdown fears, BoJ Governor Kazuo Ueda and his colleagues continued to hint at further rate hikes if inflation moves sustainably toward its 2% target.
"Long-term interest rates move on various factors. But the biggest determinant is the market’s forecast on the outlook for our short-term policy rate," Ueda told parliament on March 12, emphasizing the Bank’s resolve to keep raising short-term interest rates.
This narrative seems to be backed by Japan’s inflation remaining at its highest level since January 2023. The annual National Consumer Price Index (CPI) jumped 4% in January from December’s 3.6% print. The so-called “core-core” inflation rate, which strips out prices of fresh food and energy and is closely monitored by the BoJ, rose slightly to 2.5% in the same period from 2.4% in the month before.
Further, the country’s 10-year government bond yields recently surged to their highest level since October 2008, anticipating higher inflationary pressures. At the same time, the Japanese Yen (JPY) reached five-month highs against the US Dollar (USD).
More so, Japan's average monthly household spending rose 0.8% year-on-year (YoY) in inflation-adjusted real terms in January, marking the second consecutive month of growth.
The elevated cost of living brings closer scrutiny to the initial result of the spring wage negotiations (Shunto) announced on Friday. Japan's largest trade union group Rengo’s first-round data shows an average wage hike of 5.46% for fiscal 2025, compared to the demand of a 6.09% hike. The results, however, came in above the last year’s 5.28% raise.
These factors continue to raise expectations of rate hikes by the Japanese central bank in the upcoming months. The latest Bloomberg survey of economists showed that “July remained the favorite choice for the next hike with 48% expecting a move then, dropping from 56% in the previous survey.“
Analysts at BBH said: “The two-day Bank of Japan meeting ends Wednesday with a widely expected hold. The bank just hiked rates 25 bp at the last meeting in January.”
“BoJ Governor Ueda has cautioned that the policy path will be guided by checking the impact of rate hikes already undertaken, which argues against back-to-back rate hikes. The swaps market is pricing in the next 25 bp rate increase for September,” the analysts added.
If the BoJ reiterates that it will remain data-dependent and decides on a meeting-by-meeting basis, the Japanese Yen will likely resume its recent bearish momentum against the US Dollar (USD), driving USD/JPY back toward the March high of 151.31.
On the contrary, USD/JPY could fall hard toward 146.50 on a fresh JPY rally if the BoJ debates the next rate hike as soon as May due to concerns about inflationary pressure from wage gains, stubborn rises in food costs, and the trade war's impact.
Citing a source familiar with the BoJ's thinking, Reuters reported last week, "Japan's economy and price developments appear on track, but overseas risks have risen.” "The heightening global uncertainty is a concern and could affect the BoJ's rate-hike timing," the source said, a view echoed by two more sources.
However, any knee-jerk reaction to the BoJ policy announcements could be reversed once Governor Ueda addresses the post-policy meeting press conference at 6:30 GMT.
From a technical perspective, Dhwani Mehta, Asian Session Lead Analyst at FXStreet, notes: “USD/JPY appears at a critical juncture, exposed to two-way risks in the lead up to the BoJ’s decision. The pair has recaptured the 21-day Simple Moving Average (SMA) at 149.14, but the 14-day Relative Strength Index (RSI) remains beneath 50 despite the recent upswing.”
“A hawkish BoJ hold could revive the USD/JPY downtrend, targeting the March 13 low of 147.41. The next support is seen at the 147.00 threshold. A sustained break below that level would challenge the five-month low of 146.54. On the flip side, buyers need acceptance above the 150.00 psychological level to extend the uptrend toward the March high of 151.31. The 200-day SMA at 151.93 will act as a tough nut to crack thereafter,” Dhwani adds.
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
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