BoJ to keep interest rates unchanged through year-end - Reuters Poll
Most economists now expect the Bank of Japan will hold interest rates through year-end, a Reuters survey showed.
Additional takeaways
None of the 60 economists in the June 2-10 survey expected the BOJ to raise rates at its upcoming policy meeting on June 16-17.
52% of economists, 30 of 58, expected borrowing costs to stay at 0.50% at year-end, the reverse of a poll in May when 52% expected rates at 0.75% by end-2025.
More than three-quarters of respondents, 40 of 51, now expect at least one 25-basis-point increase by end-March, the poll showed.
Of 35 economists who specified a month for when the BOJ will next hike rates, January 2025 was the top choice at 37%, followed by 23% for October this year and 9% saying March 2025.
The BOJ exited a massive stimulus program in March last year and pushed up short-term interest rates to 0.25% in July and 0.50% in January.
Just over half of respondents, 17 of 31, said the BOJ would decelerate its pace of tapering JGB purchases from the current roughly 400 billion yen per quarter beyond April next year.
Of those respondents, the quarterly taper size prediction ranged from 200 billion yen to 370 billion yen.
Three-quarters of economists, 21 of 28, said the government would trim the issuance of super-long bonds while the rest said the amount would not change.Japan's government (not BoJ) issuance of super-long JGBs to decrease, say 75% of economists, 25% say no change.
Market reaction
At the time of writing, the USD/JPY pair is trading 0.11% higher on the day at 145.00.
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.
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