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The Bank of Japan is not in a hurry to end negative interest rates immediately and may raise interest rates for the first time after April.

2023-12-19

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The Bank of Japan begins a two-day policy meeting on Monday (December 18). Markets are focused on any further signals about a possible shift in the Bank of Japan's ultra-loose monetary stance.

Previously, Bank of Japan Governor Ueda Kazuo said the bank would maintain negative short-term interest rates and yield curve control until the inflation target of 2% is reached and remains stable.

The Bank of Japan currently sets short-term interest rates at minus 0.1%, while guiding the 10-year Japanese government bond yield to around 0%. At its last policy meeting in October, the policy committee maintained this overall framework but decided to allow the 10-year Treasury yield to rise above the previously set 1.0% cap.

Kazuo Ueda told a parliamentary meeting ahead of the final policy meeting in 2023 that the year ahead will be "more challenging," prompting market participants to interpret this as a sign that the BOJ will exit sooner than previously expected. The yuan surged against the U.S. dollar.

Investors generally believe that the Bank of Japan will raise interest rates no later than April.

However, according to people familiar with the matter, the Bank of Japan is in no rush to take action while it waits for conclusive evidence that inflation is continuing.

Through policy reviews and thoughtful signals, Kazuo Ueda will prepare the market in advance to carefully exit the stimulus plan he inherited. This process has clearly begun but is still a long way from being completed.

It is worth noting that the Bank of Japan has no intention of introducing restrictions this time. By ending negative interest rates, the Bank of Japan will emphasize that the policy remains stimulative overall.

The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.

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The Bank of Japan is not in a hurry to end negative interest rates immediately and may raise interest rates for the first time after April.

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