The Bank of Japan (BoJ) published the Summary of Opinions from the December monetary policy meeting, with the key findings noted below.
Key quotes
One member said although policy rate will remain deeply negative, Bank of Japan must carefully monitor impact of rate hike on economy and markets.
One member said BOJ must increase rates steadily to avoid being behind the curve.
One member said BOJ should scrutinize economic, price, and financial developments when adjusting degree of monetary policy rather than having a specific set pace in mind.
One member said Japan real policy rate is lowest globally so appropriate to hike considering impact on inflation through FX market.
One member said maintaining real rates at levels differing from equilibrium could cause distortions in resource distribution and affect sustained growth.
One member said government stimulus package could support economic growth for the next one to two years.
One member said real wages likely to turn positive in 1st half of next year.
Cabinet Office representative acknowledges BOJ decision as aimed at stably achieving price target, though must be vigilant to developments in capital expenditure and corporate profits.
Cabinet Office representative said hope Bank of Japan guides appropriate policy according to Bank of Japan law, government-Bank of Japan joint statement.
Market reaction
Following the BoJ’s Summary of Opinions, the USD/JPY pair is down 0.28% on the day to trade at 156.06 as of writing.
This section was published on December 28 at 22.37 GMT as a preview of the BoJ Summary of Opinions release.
The BoJ Summary of Opinions Preview
The Bank of Japan (BOJ) will publish its report on Sunday at 23:50 GMT. This report includes the BOJ's projection for inflation and economic growth. It is scheduled 8 times per year, about 10 days after the Monetary Policy Statement is released.
How could the BoJ Summary of Opinions affect USD/JPY?
USD/JPY trades flat on the day in the lead up to the BoJ Summary of Opinions. Nonetheless, the possibility that a new Federal Reserve (Fed) Chair to replace Jerome Powell could look to cut rates next year might weigh on the US Dollar (USD) against the Japanese Yen (JPY).
The first upside barrier for the USD/JPY pair is seen at the December 9 high of 156.95. The next resistance level emerges at the December 22 high of 157.70, en route to the November 20 high of 157.89.
To the downside, the December 26 low of 155.96 will offer some comfort to buyers. Extended losses could see a drop to the December 19 low of 155.44. The next contention level is located at the December 17 low of 154.51.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
