The Bank of Japan monetary policy meeting is on Thursday the 16th and Friday the 17th of June.
A preview via Scotia, this in brief:
- No policy changes are expected in this week’s communications into Friday, but there may be downward growth revisions and upward revisions to nearer-term inflation.
- Back in April, the Bank of Japan implemented a policy of unlimited buying of 10-year bonds at a 0.25% rate in daily operations as needed. The 10-year yield had been breaching the upper limit of the 0% +20bps range as the note sold off starting earlier this year. The yield has been moving sideways at just under 25bps since April and the BoJ’s credible threat can claim success.
Scotia add comments on the yen:
- On the yen, however, the challenge posed to the BoJ is a bit of a different story. The currency has fallen from 115 to the greenback in early April toward the 134 range now. This time, the BoJ is likely to continue to look through this market pressure and stand pat on policy notwithstanding political pressures. The main driver is relative central bank divergence as the Federal Reserve tightens on inflation concerns while the BoJ stands pat. Governor Kuroda recently remarked that “Japan is absolutely not in a situation that warrants monetary tightening, as the economy is still in the midst of recovering from the pandemic’s impact.”
USD/JPY has risen to 135 (a 22 year high) since Scotia issued their note on the 10th: