Bank of Japan Maintains Ultralow Policy: Updated Feb. 20, 2024

 

Bank of Japan maintains ultralow rates at policy meeting

Article Source: https://mainichi.jp/english/articles/20231219/p2g/00m/0bu/021000c

Ideas:

The decision by the Bank of Japan to not change it current policy was not a real surprise, and everyone knew the BOJ didn't really want to make any changes at this time.

It might have just gone through the motions of meeting just to appease those who wanted a meeting as a way to show they were thinking about it.

The Bank of Japan, like other central banks always uses slogans and phrases to reinforce its ideas such as the use of "reference points" and "most challenging".

The Bank of Japan is allowing long term yields to increase, incrementally, instead of any real changes to its current policy.

The weak Japanese yen is both a positive and a negative for the Japanese economy. A weak Japanese yen improves Japanese exporters revenues overseas and it improves the purchasing power of international tourists who travel to Japan and spend money.

A weak yen also is a negative for the domestic economy, and Japanese importers especially, as the weak yen compared to the strong dollar makes Japanese imports more expensive, which means of course, as Japanese is a resource-poor country many of the products in Japan have higher prices due to the weak yen.

While its not going to happen, as the rest of the advance economies begin to cutback or pause rate increases now might be a time time for in 2024, for the Bank of Japan to increase its key rate as a way to get the Japanese yen back in some kind of balance with the Euro and the US dollar.

But the challenge is, as now, looking at other articles, the Japanese economy has slipped back into a textbook recession, which is two consecutive quarters of negative economic growth.

Which means the Bank of Japan, most likely, is going to put off any changes in its current policy of low or zero rates.

Its hard to see when and how the Japanese economy might begin to finally grow, but it might all depend on wage increases in April of 2024. But the problem is most of the wage increases are related to large Japanese companies and maybe as much as 70 percent of workers in Japan don't work for large companies, which might mean no wage increases for many in the Japanese economy.

Have a nice day and be safe!