The Bank of Japan (BoJ) published the Summary of Opinions from its December monetary policy meeting, with the key findings noted below.
Key quotes
BoJ member plans to adjust easing measures if the outlook is met.
BoJ board member notes importance of monitoring momentum in wage negotiations.
One BoJ Member says no urgent need for rate hike despite upside risks.
BoJ member says yen carry trade not ideal now.
BoJ member suggests scrutiny of data necessary to determine monetary support adjustments.
BoJ member suggests confirming progress on wage negotiations for next year, taking into account the new US administration when deciding on rate hikes.
BoJ member suggests maintaining steady policy due to uncertainty in incoming US administration’s policies.
One BoJ member suggests maintaining current policy for the time being.
One BoJ member says economy and inflation remain on track.
One BoJ member says rate hike timing approaching but patience needed due to US economy uncertainty.
Member sees risks to prices tilting towards upside, proposes gradual adjustment of monetary support in a forward-looking and timely manner.
Member advocates for preemptive adjustment of monetary support.
Member sees increased likelihood of achieving bank’s outlook.
Member foresees high wage growth in Japan next year amid labour shortage.
Market reaction
Following the BoJ’s Summary of Opinions, the USD/JPY pair is down 0.13% on the day to trade at 157.76 as of writing.
Bank of Japan FAQs
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%.
The Bank of Japan embarked in an ultra-loose monetary policy in 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. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
