Interest Rate in Japan
Japan - Interest Rate
Bank of Japan maintains monetary policy stance in January
The Bank of Japan’s (BoJ) board members decided in an 8-to-1 vote to keep monetary policy unchanged. The decision, made at the 22–23 January meeting, was in line with market analysts’ expectations. The Bank decided to continue with its stimulus program (officially known as the “Quantitative and Qualitative Monetary Easing with Yield Curve Control” framework) for as long as necessary to achieve the 2.0% inflation target. The short-term policy rate applied to current account balances held by financial institutions at the Bank was left at minus 0.1%, 10-year bond yields were capped at around 0%, and the pace of Japanese government bond purchases remained at JPY 80 trillion (USD 724 billion) annually.
The Bank was slightly more upbeat regarding the trajectory of inflation than at its December meeting, when it said inflation remained in a “weakening phase”; it now sees inflation expectations “moving sideways”. The BoJ furthermore maintained its expectation that inflation will gradually increase towards its objective of 2% over the medium-to-long term, supported by a solid economic expansion which is buttressing both corporate and household spending and should gradually close the output gap.
The forecasts released by the Bank were marginally more optimistic than in the October report for the 2018 fiscal year: GDP growth is forecasted between 1.3% and 1.5%, up from 1.2% to 1.4%, while the range for inflation is now 1.3% to 1.6%, up from 1.1% to 1.6% previously. The forecasts for fiscal year 2019 were largely unchanged, with a GDP estimate of between 0.7% and 0.9% (previously: between +0.7% and +0.8%), and inflation stable at between 2.0% and 2.5%. These estimates included the effect of the consumption tax hike to 10% scheduled to be introduced in October 2019, which should bolster inflation but weigh on GDP growth somewhat.
Meanwhile, the share of households expecting inflation to accelerate reached a two-year high in January; however the BoJ has been very careful not to appear too optimistic about the outlook, for fear the market would interpret it as a declaration of intention to exit massive monetary stimulus. Reinforcing the point, Governor Haruhiko Kuroda commented, “There is still some distance to 2 percent inflation, so we’re in no condition yet to debate the timing of an exit from ultra-easy monetary policy.”
With other major central banks now starting to exit their post-crisis policies, it remains crucial for the BoJ to steer market expectations to prevent developments that could hamper inflation dynamics, such as an unwelcome rise in the value of the yen. With inflation well below the target, Governor Haruhiko Kuroda will keep the BoJ’s monetary policy program in place for the foreseeable future. The Bank’s next monetary policy meeting is scheduled for 8–9 March.
Japan Interest Rate Forecast
The analysts FocusEconomics polled this month expect the Bank of Japan’s short-term policy rate to end both 2018 and 2019 at between minus 0.05% and minus 0.10%. The 10-year bond yield is expected to be 0.10% at the end of 2018, before rising to 0.18% in 2019.Panelists expect the yen to trade at 113.8 per USD at the end of 2018. For 2019, the panel also projects that the yen will end the year trading at 112.3 per USD.
Japan - Interest Rate Data
|Policy Interest Rate (%)||0.10||0.10||0.10||0.10||-0.10|
5 years of economic forecasts for more than 30 economic indicators.
Japan Interest Rate Chart
Source: Bank of Japan.
|Bond Yield||0.05||-4.41 %||Feb 22|
|Exchange Rate||106.8||-0.35 %||Feb 22|
|Stock Market||21,736||0.40 %||Feb 22|
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February 23, 2018
In January, the core consumer price index rose 0.2% compared to the previous month in seasonally-adjusted terms, following December’s 0.1% increase. Core inflation came in at 0.9% in January, matching the result in the previous two months, which represented the joint-highest reading since March 2015.
February 21, 2018
The Nikkei flash manufacturing Purchasing Managers’ Index (PMI) declined from January’s four-year high of 54.8 to 54.0 in February.
February 19, 2018
Nominal yen-denominated exports increased 12.2% year-on-year in January, accelerating from December’s 9.3% rise and coming in above market expectations of 9.4% growth. January’s increase was driven by solid growth in exports of machinery and electrical machinery, followed by exports of chemicals, manufactured goods and transport equipment, all of which accelerated sharply relative to December’s readings.
February 15, 2018
Core machinery orders—a leading indicator of capital spending over a three to six month period—tumbled in December at the fastest pace since May 2014.
February 14, 2018
Japan’s economy ended 2017 on a weaker footing, due to a negative contribution from net exports resulting from a surge in imports in the fourth quarter.