On Thursday, the Bank of Japan maintained the short-term policy interest rate at 0.25%, in line with market expectations, and kept inflation expectations around 2%. Following the interest rate decision, the Japanese yen fluctuated within a narrow range, currently at 1 USD to 153.32 JPY. Due to rising domestic and international political uncertainties, the market is focused on whether the Bank of Japan's governor will hint at a rate hike. The yen has shown weakness recently and may face pressure for an interest rate increase
According to Zhitong Finance APP, the Bank of Japan maintained its short-term policy interest rate at 0.25% on Thursday, in line with market expectations. The Bank of Japan also roughly maintained its inflation expectations, indicating that inflation will hover around the 2% target in the coming years, suggesting its readiness to continue reducing large-scale monetary stimulus measures. After the interest rate decision was announced, the Japanese yen fluctuated within a narrow range against the US dollar.
In its quarterly outlook report, the Bank of Japan stated, "The Bank of Japan needs to pay appropriate attention to the future trends of the overseas economy, especially the US economy, as well as the developments in the financial markets."
As of the time of writing, the Japanese yen rose 0.1% against the US dollar, to 153.32 yen per dollar.
Strategists indicated before the Bank of Japan meeting that rising uncertainties from domestic Japan and US politics could prevent the Bank of Japan from raising interest rates this month. The rise in US Treasury yields, the Federal Reserve's cautious stance on further rate cuts, and the upcoming US presidential election have all put pressure on the yen, which is set to experience its worst month since 2016.
After the ruling coalition in Japan lost its majority, the yen fell to its lowest level since July on Monday, continuing a four-week decline. This prompted warnings from Japanese authorities, with Finance Minister Katsunobu Kato stating on Tuesday that the yen had weakened significantly after the Japanese election, and the government would pay closer attention to foreign exchange trends with greater urgency.
The market is closely watching whether Bank of Japan Governor Kazuo Ueda will hint at the next interest rate hike during the press conference on Thursday afternoon. If the yen continues to weaken, the Bank of Japan may face greater pressure to raise interest rates sooner