The Japanese central bank decided this Thursday to maintain the reference short-term interest rate at 0.25%, while evaluating the economic and market impact of Sunday’s general elections.
At the end of a monthly meeting, the Bank of Japan Monetary Policy Board (BoJ) unanimously decided to leave its strategy intact after taking into account that “there continue to be great uncertainties regarding economic activity and the evolution of inflation in the country.”
The decision is in line with what was expected by most analystswhich did not foresee new short-term rate increases in the world’s fourth largest economy, after the two increases applied by the BoJ in March and July.
The 0.1% increase implemented in March puts an end to a negative rate policy that lasted for 17 years.
This was the first meeting of the Japanese central bank after Sunday’s general election, in which the coalition led by the ruling Liberal Democratic Party lost its parliamentary majority, forcing Prime Minister Shigeru Ishiba to seek support from smaller groups. of the opposition to form a government.
The uncertainty also caused a sharp drop in the Japanese currency.which this week depreciated beyond 153 yen against the dollar, the lowest level in three months.
The trend is attributed to the difference between the monetary strategy of the BoJ, whose interest rates remain well below those of other counterpart institutions such as the European Central Bank and the US Federal Reserve (Fed).
The monetary policy council of the Japanese central bank indicated that It will maintain the monetary strategy as long as the country’s inflation and growth do not deviate from its projections.
The BoJ’s next rate hike is expected to occur in late 2024 or early 2025.
Prime Minister Shigeru Ishiba has sent a mixed message, saying that the BoJ “is the one who must achieve price stability”, although he has assured “close collaboration” with the central bank.
Japan Consumer Price Index increased 2.4% year-on-year in September, marking 37 consecutive months of inflationwhose value remains above the 2% inflation target set by the central bank for more than two years.
“The Japanese economy has recovered moderately, although some weakness can still be observed,” concludes the BoJ report, which highlights that inflation could also experience some recovery.
Source: Observadora
