Sun, May 19, 2024

JPY: BoJ: Interest Rate Raised to 0%, YCC Abandoned

The Bank of Japan hiked 10 basis points to 0.0% from -0.10% rate first time rate hike since 2007. The negative rate era ended now since 2016 implemented. The Bank of Japan said they are continue to buy the JGB Bonds in the market whatever is needed, if inflation achieved 2% target with the sustainable wage hikes then we do rate hikes accordingly and we reduce the JGB Bonds purchases buying . JPY is Depreciated against counter pairs after the rate hike.

USDJPY has broken Ascending channel in upside

USDJPY has broken Ascending channel in upside

BoJ Raises Interest Rate to 0%, Ends Negative Era

After its two-day meeting, the Bank of Japan (BoJ) decided to increase the interest rate by 10 bps to 0%, marking the first rise since 2007. This move concludes the negative interest rate policy initiated in 2016, aligning with market expectations.

Summary of BoJ Policy Changes:

– Overnight call rate targeted at 0% to 0.1%.

– 0.1% interest applied to excess reserves with BoJ.

– Continuation of JGB purchases at current levels.

– Cessation of ETF and J-REIT buying.

– Gradual reduction in CP and corporate bond purchases.

– Discontinuation of CP and corporate bond purchases in approximately one year.

– Decision on long-term JGB buying made by 8-1 vote.

– Unanimous decision on asset buying other than long-term JGBs.

– Unanimous decision on treatment of new loan disbursements.

– BoJ to flexibly increase JGB buying regardless of monthly schedule.

– Change in monetary policy framework announced.

– Virtuous cycle between wages and prices assessed.

– Expectation of achieving 2% price stability target.

– QQE, YCC, and negative rate policy considered fulfilled.

– Short-term interest rate to be primary policy tool.

– Accommodative financial conditions expected to persist.

– Continued JGB buying at current levels anticipated.

– Commitment to inflation overshooting on monetary base fulfilled.

– Preparedness for rapid yield rise with nimble responses.

– Moderate recovery expected in Japan’s economy.

– CPI likely to exceed 2% through fiscal 2024.

– Underlying CPI inflation seen gradually increasing.

– High uncertainties in Japan’s economy and prices.

– Attention to market, FX developments, and economic impact.

– Continued announcement of JGB buying plans with flexibility based on market conditions.

JPY: BoJ Ditches Negative Interest Rate

The Bank of Japan hiked 10 basis points to 0.0% from -0.10% rate first time rate hike since 2007. The negative rate era ended now since 2016 implemented. The Bank of Japan said they are continue to buy the JGB Bonds in the market whatever is needed, if inflation achieved 2% target with the sustainable wage hikes then we do rate hikes accordingly and we reduce the JGB Bonds purchases buying . JPY is Depreciated against counter pairs after the rate hike.

EURJPY is moving in an Ascending channel and the market has reached the higher high area of the channel

EURJPY is moving in an Ascending channel and the market has reached the higher high area of the channel

BoJ Ends Negative Interest Rate, Unwinds Aggressive Easing

Japan’s central bank announced the cessation of its negative interest rate on Tuesday, marking the beginning of the unwinding process for one of the most aggressive monetary easing programs globally.

In its first rate increase in 17 years, the Bank of Japan transitioned its short-term policy rate from -0.1 percent to a range between zero and 0.1 percent.

The decision came as officials assessed the progress towards achieving the two percent price stability target, foreseeing sustainable and stable conditions by the end of the projection period outlined in the January 2024 Outlook Report.

Japanese yen sends higher more against US Dollar

Additionally, the bank disclosed plans to terminate other unconventional policies, including the yield curve control program on bonds and the purchase of risk assets such as exchange-traded funds (ETFs) and Japan real estate investment trusts.

While the Federal Reserve and other central banks globally hiked rates to curb rising inflation following Russia’s 2022 invasion of Ukraine, Japan remained haunted by its “lost decades” of stagnation and deflation, maintaining its main rate negative since 2016, with the last hike dating back to 2007.

The rate hike is anticipated to raise borrowing costs for consumers and businesses, increasing Japan’s debt servicing bill, one of the world’s highest at around 260 percent of national output.

Negative interest rates aimed to incentivize banks to lend to businesses, jump-starting the economy and inflation. Moreover, the BoJ injected liquidity into the financial system through massive purchases of bonds and other assets, resulting in a weaker yen against the dollar, beneficial for exporters but detrimental for consumers due to increased import costs.

Despite inflation hovering around the BoJ’s two percent target for almost two years, the main interest rate remained negative, as the central bank awaited further evidence of a sustainable “virtuous cycle” of rising wages and inflation driven by demand.

USDJPY consolidated between ranging markets and waiting for FED outcome today

The recent wage hike secured by Japan’s largest trade union signaled progress towards sustaining two percent inflation domestically.

While the BoJ was set to eliminate other unconventional measures, such as the yield curve control program and risk asset purchases, moving too aggressively could attract large volumes of capital to Japanese assets, potentially destabilizing financial markets.

JPY: Japan Raises Interest Rates After 17 Years

The Bank of Japan hiked 10 basis points to 0.0% from -0.10% rate first time rate hike since 2007. The negative rate era ended now since 2016 implemented. The Bank of Japan said they are continue to buy the JGB Bonds in the market whatever is needed, if inflation achieved 2% target with the sustainable wage hikes then we do rate hikes accordingly and we reduce the JGB Bonds purchases buying . JPY is depreciated against counter pairs after the rate hike.

GBPJPY is moving in an Ascending channel and the market has reached the higher high area of the channel

GBPJPY is moving in an Ascending channel and the market has reached the higher high area of the channel

Japan Raises Interest Rates After 17 Years

Japan’s central bank raised interest rates for the first time since 2007 on Tuesday, marking a pivotal shift in its effort to stimulate an economy plagued by prolonged stagnation.

In 2016, the Bank of Japan introduced negative interest rates, aiming to incentivize borrowing and spending in a bid to revive the sluggish economy. However, recent indicators of stronger growth, including accelerated inflation and rising wages, suggest that the economy may be capable of sustained expansion without such aggressive stimulus measures.

Despite this move towards normalization, Japan’s interest rates remain considerably lower than those of other major developed economies. The Bank of Japan raised its target policy rate to a range of zero to 0.1 percent from minus 0.1 percent.

The central bank emphasized the emergence of a “virtuous cycle” between wages and prices, indicating that wage increases are keeping pace with rising prices, contributing to a stable economic environment. Inflation in Japan stood at 2.2 percent in January, reflecting the positive momentum.

Bank of Japan governor Kuroda said it is time for support for corporate funding

Additionally, the central bank discontinued its policy of purchasing Japanese government bonds to control market rates, signaling a gradual retreat from unconventional measures as the country’s growth outlook improves.

The decision to move away from negative interest rates is seen as a significant step in Japan’s economic revival, bolstering the country’s weak currency and attracting investor confidence. However, policymakers remain cautious about the pace of tightening, mindful of potential risks to growth.

The rise in wages signals growing confidence among companies and workers, indicating a belief that higher prices are here to stay. This shift in sentiment contributes to the central bank’s optimism about steady wage growth in the coming year.

While Japan’s exit from negative interest rates aligns with broader global trends, the central bank remains prudent in its approach, recognizing the need for a gradual transition to avoid disrupting the nascent economic recovery


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