BoJ keeps policy settings unchanged with rates kept at -0.10% and YCC unchanged to target 10yr JGBs at 0% via unanimous vote, while it keeps yield band and yield target unchanged

Says:

• Extends fund operation to support financial lending by one year.


• Issued amendment to principal terms and conditions for funds supplying operations against pooled capital.


• Maintains forward guidance on interest rates and guidance that it will continue large-scale JGB buying and make nimble responses for each maturity.


• Uncertainty for Japan's economy is extremely high.


• Will not hesitate to take additional easing measures as necessary.


• Price growth is expected to narrow towards the middle of next fiscal year.


• Inflation expectation is on the rise.


• It takes time but prices will gradually rise towards the inflation target on the back of rises in inflation expectations and wage increases.


• Prices could deviate downwardly as wage hikes won't strengthen as expected.

Outlook Report

Real GDP

• Fiscal 2022 median forecast cut to 1.9% from 2.0%.


• Fiscal 2023 median forecast cut to 1.7% from 1.9%.


• Fiscal 2024 median forecast cut to 1.1% from 1.5%

Core CPI

• Fiscal 2022 median forecast raised to 3.0% from 2.9%.


• Fiscal 2023 median forecast maintained at 1.6%.


• Fiscal 2024 median forecast raised to 1.8% from 1.6%.

Reaction details (03:08)

• USD/JPY immediately moved higher by 168 pips from 128.50 to 130.18 and continued higher to trade at 130.80 in the 12 minutes after the announcement.


• Nikkei 225 futures spiked to 26,680 from around 26,250.


• Emini S&P immediately rose to 4,018 from 4,000.

Analysis details (03:18)

• BoJ defied the increased speculation for a policy tweak and kept its policy settings unchanged with NIRP kept at -0.10% and the parameters of its YCC maintained at current levels. The central bank stuck with its forward guidance on rates and that it will continue large-scale JGB buying and make nimble responses for each maturity, while it also reiterated it will not hesitate to take additional easing measures as necessary. Furthermore, the central bank's projections was also dovish leaning as it cut Real GDP forecasts across the projection horizon and although it mostly increased its core CPI view, the estimates for Fiscal 2023 and 2024 both remained below 2% which is the BoJ's target and a level that could have paved the way for policy normalisation.

18 Jan 2023 - 02:42- Fixed IncomeData- Source: Newswires