The Bank of Japan (BoJ) minutes from the December meeting reveal a cautious approach to monetary policy, maintaining interest rates at 0.25% despite calls for a hike. The BoJ acknowledges the benefits and drawbacks of years of easing and emphasizes the importance of sustainable inflation near 2%.
The Bank of Japan (BoJ) provided insights into its monetary policy outlook during its December meeting, as detailed in the released minutes. Key takeaways reveal that the BoJ maintained its uncollateralized overnight call rate at approximately 0.25%, aligning with its previous stance. The bank continued its planned government bond purchases, acquiring ¥4.9 trillion worth of Japanese government bonds (JGBs) monthly.
The Japanese economy demonstrated moderate recovery, underpinned by improving corporate profits and stable employment, although some underlying weaknesses persist. Inflation remained within the 2.0-2.5% range, fueled by rising service prices and wage growth. However, the influence of past import price surges has diminished. The BoJ conducted a review of its long-term monetary policy since the late 1990s, acknowledging both the benefits and potential drawbacks of large-scale monetary easing. Policymakers emphasized the importance of achieving sustainable inflation near 2%, stressing the need for cautious adjustments to monetary policy. While some members advocated for an interest rate hike to 0.5%, the majority voted to maintain rates at 0.25%, citing uncertainties surrounding wage growth and global economic conditions. The BoJ reaffirmed its cautious approach, stating that any future policy modifications would hinge on inflation trends, wage growth, and global economic risks. The policy statement was unanimously approved, solidifying the continuation of monetary easing while closely monitoring inflation and financial stability. Market reaction to the BoJ minutes at the time of writing indicated a 0.04% daily increase in USD/JPY to 155.58
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