The Bank of Japan maintained its negative interest rate and the yield curve control on Tuesday, and also retained its dovish forward guidance at the final meeting of the year.<\/p>\n
The BoJ policy board, led by Governor Kazuo Ueda, unanimously decided to maintain a negative interest rate of 0.1 percent on current accounts that financial institutions maintain at the central bank.<\/p>\n
The bank also decided to regard the upper bound of 1.0 percent for 10-year JGB yields as a reference in its market operations. <\/p>\n
“With extremely high uncertainties surrounding economies and financial markets<\/span> at home and abroad, the Bank will patiently continue with monetary easing while nimbly responding to developments in economic activity and prices as well as financial conditions,” the bank said. <\/p>\n The BoJ board said the economy<\/span> is likely to continue recovering moderately for the time being, underpinned by factors such as the materialization of pent-up demand. <\/p>\n Japan’s economy is projected to continue growing at a pace above its potential growth rate once a virtuous cycle from income to spending gradually intensifies, the bank said.<\/p>\n Further, the board said underlying inflation is set to rise gradually toward achieving the price stability target, as the output gap turns positive and as medium- to long-term inflation expectations and wage growth rise.<\/p>\n Capital Economics’ economist Marcel Thieliant said he still expects policymakers to end negative rates in January.<\/p>\n Nonetheless, concerns about financial stability will encourage the bank to wait a few more months before officially abandoning Yield Curve Control later in 2024, the economist added. <\/p>\n As the governor mentioned that there is not much new data before the January meeting, the option of a rate hike won’t be on the table, ING economists said. <\/p>\n But in January, the release of macro outlook report and the US treasury rally will likely justify the change in the yield curve control policy, they noted. <\/p>\n ING expects the first rate hike to come sometime after in the second quarter. <\/p>\n