BoJ keeps policy settings unchanged as expected with rates at -0.10%, while it maintains QQE with YCC to flexibly target 10yr JGB yields at around 0% and keeps 1% upper bound reference rate for market operations

Says:

• Decision on YCC was made by unanimous vote.


• Makes no change to forward guidance.


• Will continue with QQE with YCC as long as needed.


• Won't hesitate to take additional easing steps if needed.


• Will patiently continue with monetary easing while nimbly responding to developments.


• Will extend by 1-year the deadline for loan disbursement under fund-provision measure to stimulate bank lending.


• Inflation expectations are gradually heightening.


• Inflation will likely gradually accelerate towards the BoJ target through end of projected period in quarterly report.


• Consumption continues to rise moderately.

Outlook Report Forecasts:

Real GDP 

• Fiscal 2023 median forecast cut to 1.8% from 2.0%.


• Fiscal 2024 median forecast raised to 1.2% from 1.0%.


• Fiscal 2025 median forecast maintained at 1.0%

Core CPI 

• Fiscal 2023 median forecast maintained at 2.8%.


• Fiscal 2024 median forecast cut to 2.4% from 2.8%.


• Fiscal 2025 median forecast raised to 1.8% from 1.7%.

Reaction details (03:32)

USD/JPY initially climbed by 38 pips to 148.55 from 148.17 in the 2 minutes after the decision but then faded the gains and briefly pared the entire move in the 10 minutes after the initial announcement.

Analysis details (03:32)

BoJ refrained from any surprises and maintained its policy settings with negative rates at -0.10% and its 10yr JGB yield target at 0% with a 1% reference for purchase operations. BoJ also kept its forward guidance unchanged with a pledge to continue with QQE with YCC as long as needed and won't hesitate to take additional easing steps if required. Furthermore, it noted that inflation expectations are gradually heightening and that inflation will likely gradually accelerate towards the BoJ target through to the end of the projected period. The latest Outlook Report also provided very little to catch markets off guard as although the fiscal 2024 median forecast was cut to 2.4% from 2.8%, this was in line with expectations for a reduction to the mid-2% range, while the fiscal 2025 median forecast was raised to 1.8% from 1.7%.

23 Jan 2024 - 03:09- Fixed IncomeImportant- Source: Newswires