Interest Rate in Japan
Japan - Interest Rate
BoJ keeps monetary policy unchanged in July, vows to expand stimulus if inflation falters
At its 30 July meeting, board members at the Bank of Japan (BoJ) decided in a seven-to-two vote to keep its monetary policy unchanged, in line with market analysts’ expectations. The BoJ kept the short-term policy rate applied to current account balances held by financial institutions at the Bank at minus 0.10%. 10-year Japanese government bond (JGB) yields will continue to be capped at around 0%, although the yields will be able to move up and down to some extent. Moreover, the Bank will continue to purchase Japanese government bonds (JGBs) at an unchanged, flexible pace of about JPY 80 trillion (USD 657 billion) per year. Regarding asset purchases other than JGBs, the board unanimously decided to continue purchasing exchange-traded funds (ETFs) and Japanese real estate investment trusts (J-REITS) at an annual pace of about JPY 6 trillion and JPY 90 billion yen, respectively. Similarly, the Bank’s purchases of commercial paper and corporate bonds were kept unchanged at about JPY 2.2 trillion yen and JPY 3.2 trillion yen per year.
BoJ members elected to keep the monetary policy framework unchanged despite heightened downside risks to the growth and inflation outlook, especially related to lower global growth, the U.S.-China trade war and Japan’s feud with South Korea. While they acknowledged these risks, they reaffirmed their belief that both domestic demand and inflation should gradually trend higher, especially thanks to a positive output gap.
Nevertheless, the monetary policy statement added that “the Bank will not hesitate to take additional easing measures if there is a greater possibility that the momentum toward achieving the price stability target will be lost.” This signal that the BoJ was willing to move pre-emptively against potential inflation weakness was reinforced by Governor Haruhiko Kuroda’s comments at the post-meeting press conference, emphasizing the Bank’s stronger commitment. In any case, a policy move would likely depend on the evolution of foreign exchange markets, with the yen potentially under upward pressure due to the interest rate cut announced by the U.S. Federal Reserve on 31 July, and likely dovish shifts from other large central banks.
Takashi Miwa, Nomura’s chief Japan economist, stated that:
“The BOJ has publicly stated that it would pursue additional easing measures if needed, but we think its only practicable option for further easing is that of accelerating its expansion of the monetary base, accomplished by means of stepped-up purchases of JGBs made in coordination with increased fiscal outlays and increased issuance of JGBs to fund those outlays. We would expect the BOJ to pursue additional easing only if yen appreciation were to take USD/JPY to around 100 […]. In any other circumstances, we expect the BOJ to simply carry on with its current monetary policies.”
The Bank is expected to continue with its stimulus program (officially known as the “quantitative and qualitative monetary easing with yield curve control” framework) at least until spring 2020, in order to achieve the Bank’s inflation target in a stable manner. The Bank’s next monetary policy meeting is scheduled for 18–19 September.
The majority of analysts FocusEconomics polled this month expect the Bank of Japan’s short-term policy rate to remain at minus 0.10% through to the end of 2020. The 10-year bond yield is expected to fall to minus 0.07% at the end of 2019, before climbing to 0.03% at the end of 2020. Panelists expect the yen to trade at 107.8 per USD at the end of 2019. For 2020, they project that the yen will end the year at 105.9 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||-0.16||-4.41 %||Jul 31|
|Exchange Rate||108.8||-0.35 %||Jul 31|
|Stock Market||21,522||0.40 %||Jul 31|
Get a sample report showing our regional, country and commodities data and analysis.
Request a Trial
Start working with the reports used by the world’s major financial institutions, multinational enterprises & government agencies now. Click on the button below to get started.
August 23, 2019
The core consumer price index rose 0.1% in month-on-month seasonally-adjusted terms in July, contrasting June’s 0.1% drop. Core inflation was stable at June’s 0.6% in July.
August 22, 2019
The Jibun Bank flash manufacturing Purchasing Managers’ Index (PMI) rose from July’s 49.4 (previously reported: 49.6) to 49.5 in August.
August 19, 2019
Nominal yen-denominated merchandise exports fell 1.6% year-on-year in July, up from June’s 6.6% decline.
August 14, 2019
Core machinery orders, a leading indicator for capital spending over a three- to six-month period, posted the fastest expansion since January 2003 in June, suggesting that capital expenditure will remain resilient in the coming months.
August 9, 2019
GDP expanded 1.8% in seasonally-adjusted annualized terms (SAAR) in Q2, below the 2.8% (SAAR) expansion registered in Q1 but comfortably beating market analysts’ expectations of a 0.4% increase.