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    Japan’s Suzuki: Government and BOJ are working together to hit inflation target

    Source Fxstreet
    Jan 26, 2024 02:01

    Japan's Minister of Finance Sunichi Suzuki said on Friday that the government and the Bank of Japan (BoJ) are working closely together based on the need to achieve the 2% inflation target stably and sustainably. Suzuki added that he expects the BOJ to guide policy appropriately.

    Market reaction

    At the time of writing, USD/JPY is trading 0.11% lower on the day at 147.56

    Bank of Japan FAQs

    What is the Bank of Japan?

    The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.

    What has been the Bank of Japan’s policy?

    The Bank of Japan has embarked in an ultra-loose monetary policy since 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds.

    How do Bank of Japan’s decisions influence the Japanese Yen?

    The Bank’s massive stimulus has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy of holding down rates has led to a widening differential with other currencies, dragging down the value of the Yen.

    Is the Bank of Japan’s ultra-loose policy likely to change soon?

    A weaker Yen and the spike in global energy prices have led to an increase in Japanese inflation, which has exceeded the BoJ’s 2% target. Still, the Bank judges that the sustainable and stable achievement of the 2% target has not yet come in sight, so any sudden change in the current policy looks unlikely.

    Disclaimer: For information purposes only. Past performance is not indicative of future results.
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