Bank of Japan Holds Rate Steady Following Two Hikes

Bank of Japan Holds Rate Steady Following Two Hikes

Following two rate hikes this year, the Bank of Japan kept its benchmark rate on Friday and indicated that while policy normalization will continue, further action will depend on the data.

The Policy Board voted unanimously to keep the uncollateralized overnight call rate at approximately 0.25 percent. The highest since late 2008 was this.

The BoJ recently hiked the benchmark rate to its present level in July, having abandoned its negative interest rate policy in March. This year, the bank has tightened the policy twice.

In the press conference, Governor Kazuo Ueda stated that should pricing and economic projections materialize, the BoJ will modify the level of monetary support.

Japan’s tightening of its monetary policy ran counter to other major central banks’ actions this year, which involved easing.

Japan’s Economy Recovers

The BoJ emphasized in the statement that while there has been some weakening, the economy has recovered fairly. The bank also revised its assessment of consumption, noting that it has been trending upward but moderately.

Marcel Thieliant, an economist at Capital Economics, predicted that the BoJ will raise its policy rate by a quarter point at its October meeting.

The next hike’s date is still up in the air, according to ING experts, but December is a possibility.

The Ministry of Internal Affairs and Communications released data earlier in the day indicating that Japan’s consumer price inflation increased from 2.8% in July to 3.0% in August.

From 2.7% in July, core inflation—which does not include fresh food—rose to 2.8%.

The regular price hikes in October and the September commencement of the utility subsidy program could lead to fluctuations in inflation figures during the coming months, according to ING researchers.

They stated in September that once the government reinstates the summertime temporary energy subsidy program, inflation is expected to drop significantly to the mid-2 percent area.

Meanwhile, for the first time in more than four years, the US Federal Reserve cut its benchmark rate this week by a more than anticipated 0.5% point. Following a quarter-point decrease in August, the Bank of England kept its bank rate at 5.00 percent on Thursday.

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