BNY’s Head of Markets Macro Strategy Bob Savage notes that the Bank of Japan (BoJ) kept its policy rate around 0.75% with an 8–1 vote, noting moderate economic recovery and inflation near 2%. The bank projects gradual growth and a steady rise in prices, and maintains a hawkish bias by signaling it will continue raising rates and adjusting accommodation if its outlook is realized, while monitoring Middle East risks.

Hawkish hold underpins Japanese yields

"The Bank of Japan’s Monetary Policy Meeting has voted 8-1 to keep the uncollateralized overnight call rate around 0.75%."

"The uncertainty over the energy price shock is showing up in central bank statements and a clear slowdown in their planned action plans ahead. The BoJ keeping rates on hold wasn’t a surprise, but the rise in JGB yields shows the cost. BoJ Governor Kazuo Ueda still sees some distance before the price target is met, with uncertainty linked to the conflict in the Middle East and energy. "

"The bank is projecting moderate growth and a gradual rise in inflation, targeting price stability at 2% while monitoring risks from Middle East tensions, crude oil prices and global economic policies."

"Japan’s economy has seen a moderate recovery with resilient private consumption and moderate business investment, despite flat exports and industrial production. Inflation (CPI excluding fresh food) had risen 2% y/y due to food price increases but recently eased to around 2%, influenced by government measures on energy costs."

"The BoJ maintained a hawkish outlook, commenting that it would “continue to raise the policy interest rate and adjust the degree of monetary accommodation,” if the outlook for economic activity and prices is realized."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)