The Bank of Japan (BoJ) maintained its ultra-accommodative monetary policy unchanged on Friday, thus continuing to believe that the conditions for growth and inflation are not met in the country to start tightening the screw on credit.
The institution has kept its short-term key rate at a negative level of 0.1%, and will continue to buy as many Japanese government bonds (JGBs) as necessary to keep their ten-year yields between -0.5 % and +0.5%, according to a press release.
Even if this status quo had been largely anticipated by economists, the yen lost ground after the announcements of the BoJ, because its policy is the opposite of the monetary tightening carried out elsewhere in the world, such as in the United States and in the euro zone. euro.
On Wednesday, the US Federal Reserve (Fed) paused rate hikes but warned they could raise them again later this year. On Thursday, the European Central Bank (ECB) again raised its key rate and said it would not be the last time.
The dollar thus rose to 140.44 yen around 03:45 GMT, whereas it had briefly fallen below 140 yen shortly before the BoJ’s decision.
And the euro climbed to 153.63 yen after falling to 153.09 yen in the morning Japanese time.
Inflation also jumped in Japan last year due in particular to soaring energy prices against the backdrop of the war in Ukraine, but in proportions much lower than those observed in the United States and Europe.
Although the rise in consumer prices started to accelerate again in April in Japan (+3.4% excluding fresh products), thus remaining well beyond the BoJ’s 2% target, the latter continues to anticipate a slowdown towards the middle of the 2023/24 financial year starting on April 1, due to an attenuation of the effects of the pass-through of cost increases linked to imports on selling prices.
Economic growth is holding up in the Japanese archipelago thanks to late post-pandemic catch-up effects, but it remains sluggish (+0.7% in the first quarter compared to the fourth quarter of 2022, according to revised data published last week).
And while many companies in Japan have agreed to significant wage increases this year, this is not enough to fully offset inflation, and the evolution of wage dynamics next year remains uncertain.