BOJ and Possible Rate Hike: Updated Dec. 19, 2024.

 

BOJ weighs skipping rate hike at next week's policy meeting: sources

Article Source:   https://mainichi.jp/english/articles/20241214/p2g/00m/0bu/002000c

Ideas:

The Bank of Japan is very conservative and doesn't make a move if there are uncertainties

 either internal or external.

There are definitely going to be some uncertainties with the US economy in the future, and

 as Japan depends a lot on the US for its exporting, it might be a good time to just sit and

 wait to see what is going to happen the next few months.

Most likely the wage increases that have helped the Japanese economy in the short-term has

 not translated into the economic affect that the BOJ had hoped for such as increases

 consumer spending among Japanese workers.

Yes, the BOJ has been very conservative in making decisions, but that's the nature of the

 banking industry including the Bank of Japan.

Economic indicators might be moving in line with expectations, but they are still not

 enough to get the BOJ to move on a rate increase, as they are also looking globally and

 watching what is going on.

The three key areas they are looking at is China, and its economy, the EU and what is going

 on there, and with the US and the new administration and what is going to happen to the

 US economy.

The BOJ will look for the best time to increase the key rate but it might not be next week and the BOJ meeting, as the US economy and the future administration, seems to be dominating the thinking at this time.

The BOJ current level of 0.25 is very low as the US rate is around 5.0 so there is a significant variance in the two rates which might be the reason for the weak Japanese yen.

A question to be asked is why has the BOJ allowed the rate to be at a historical low, when the Japanese domestic economy is having challenges from high import prices related to the weak Japanese yen.

One reason might be that the weak Japanese yen is good for Japanese exporters and Japanese investors overseas, and it helps the large group of foreign visitors who go to Japan and can have more purchasing power, which means they can spend a lot in Japan, all of which helps the Japanese economy.

Have a nice day!