2023-09-24 09:41:00
Unsurprisingly, the Bank of Japan (BoJ) maintained its ultra-accommodating monetary policy at the end of the week, despite inflation in the country which remains well above its 2% target and the great weakness of the yen compared to to the dollar. The BoJ will continue its unlimited bond purchases so that ten-year Japanese yields do not exceed 1%, its new red line set in July, and it has kept its negative short-term key rate at -0.1%. “The status quo is not a surprise. After the widening of the band of fluctuations of the 10-year rate in July, it is difficult for the BoJ to follow up with a new major adjustment. According to the BoJ, macroeconomic conditions are not met and “extremely high” uncertainties still weigh on the economy and financial markets., explained Groupama economist Thuy Vân Pham in a note.
Highlighting “a context of extremely high uncertainties” surrounding the economy and financial markets in Japan as in the rest of the world, the BoJ intends to continue its monetary easing “patiently”, while reacting “flexibly” to developments. economic activity, prices and financial conditions, according to its press release.
The yen starts to fall once more
This status quo immediately pulled the yen down once morest the dollar and the euro: around 09:00 GMT the greenback was worth 148.28 yen while it was hovering around 147.74 yen just before the BoJ’s announcements.
The Japanese currency is suffering from the gap between ultra-accommodating Japanese monetary policy and the increases in key rates carried out elsewhere such as in the United States.
The yen has fallen in recent days to its lowest levels in ten months once morest the dollar, fueling speculation regarding a possible new intervention by Japan on the foreign exchange market to support its currency, as last fall.
The BoJ also continues to believe that the rise in consumer prices in Japan will probably decelerate in the coming months, a prospect which justifies maintaining its ultra-accommodating course.
Inflation at 3.1%
Inflation in the archipelago, however, remained stable in August, at 3.1% over one year excluding fresh products as in July, according to government data published earlier this Friday, while economists were counting on a small slowdown.
Inflation in Japan was first driven in 2022 by the surge in energy prices following the outbreak of the war in Ukraine. But since the start of 2023, other expenditure items have fueled it, such as processed food products and services.
Break at the BoE
After 14 consecutive monetary tightenings, the Bank of England (BoE) chose Thursday to leave its rates unchanged, at 5.25%, following in the footsteps of the American Federal Reserve (Fed) which had made the same decision the day before .
The BoE is thus marking a first pause since the start of its rate hike cycle initiated in December 2021, also following in the footsteps of the Swiss Central Bank a little earlier Thursday.
The British Monetary Institute, on the other hand, takes the opposite view of the European Central Bank, but also of its counterparts in Sweden and Norway, which raised their rates by 0.25 percentage points. However, BoE rates remain at their highest levels since April 2008.
(With AFP and Archyde.com)
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