The world is closely watching the Bank of Japan’s monetary policy meeting to be held on the 18th and 19th. Although Bank of Japan Governor Kazuo Ueda has been working to end the world’s last remaining negative interest rate regime, it is highly unlikely that this will happen at this meeting.
What we know from interviews with multiple people familiar with the situation is that there is not enough evidence to realize a virtuous cycle of wages and prices, so negative interest rates and yield curve control (yield curve control, YCC The Bank of Japan recognizes that there is little need to rush to abolish this month.
Rock Bottom
Japan’s interest rates have hovered around zero for a quarter century
Source: Bloomberg, BOJ, Fed, ECB
Bank of Japan watchers will therefore be scrutinizing the Bank of Japan’s statements and Governor Ueda’s comments for clues about the outlook for wage increases and how improving the wage environment will boost consumption and demand-driven inflation.
According to a Bloomberg survey of 52 economists conducted on the 1st-6th, 67% of respondents expected the Bank of Japan to raise its short-term policy interest rate, currently at minus 0.1%, by its April meeting next year.
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Taro Kimura, senior economist in charge of Japan at Bloomberg Economics (BE), said in a report that Governor Ueda has given the market enough advance notice to move away from the stimulus he inherited from his predecessor through policy reviews and thoughtful signaling. Noting that the BE has insisted that it will move very carefully while making preparations, he noted that the process has clearly begun, but there is a long way to go before it ends.
On the surface, the Bank of Japan’s mission may seem a bit troubling, as the US Federal Reserve has strongly signaled to markets that it will cut interest rates in 2024.
What we must not forget is that the Bank of Japan has no intention of setting interest rates that suppress the economy. Governor Ueda will emphasize that even if negative interest rates are ended, policy will still be generally stimulative.
Central Bank Rate Decisions This Week
Source: Bloomberg
Original title:BOJ Isn’t Ready for Requiem to Negative-Rate Era: Eco Week Ahead (excerpt)
2023-12-16 23:39:00
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