Key Takeaways
The Bank of Japan (BoJ) unanimously decided to
leave its policy settings unchanged. The policy rate
was left at -0.1% and the target for 10-year bond yields
was maintained at 0% with an upper bound of 1%.
The BoJ also extended by one year the deadline for
loan disbursement under the Fund-Provisioning
Measure to Stimulate Bank Lending.
The near-term forecasts for inflation were lowered a
touch to reflect the recent decline. We continue to think
inflation will fall further over the next few quarters as
pressures from past import inflation abate.
However, the BoJ’s fiscal year 2025 inflation forecast
was nudged up to 1.8%, and the wording around
service price expectations was strengthened to reflect
the potential for a virtuous cycle between wages and
prices.
The usual mix of caution and optimism was evident
throughout the statement, forecasts and press
conference. On the one hand, Governor Ueda believes
that the likelihood of hitting the inflation target over the
medium term continues to rise. On the other hand,
even as the price goal looks to be in sight, the BoJ will
maintain an easy stance.
We continue to expect that yield curve control (YCC)
and negative interest rate policy (NIRP) will be
removed later this year, after the BoJ has confirmed a
strong Shunto wage round. Timing the precise meeting
for any policy change is difficult, but, on balance, we
expect a move by July.