The Bank of Japan (BOJ) maintained its short-term policy rate target at 0.25% on Thursday, keeping borrowing costs unchanged. Governor Kazuo Ueda offered few clues on how soon the BOJ might raise interest rates, sending the yen tumbling.
Tamura, a hawkish board member, proposed raising rates to 0.5%, but his proposal was rejected. The BOJ’s decision sent global stocks sharply lower after the US Federal Reserve cut interest rates.
Ueda reiterated the central bank’s resolve to keep raising rates if the economy and prices move in line with forecasts. However, he expressed a need for more information on wage increases, which are crucial to the BOJ’s forecast of inflation.
The BOJ will monitor next year’s wage talks closely, with investors speculating that the bank might wait until March to raise rates. Ueda said the BOJ would not necessarily need a specific event or data point to hike rates, but Japan’s underlying inflation remained moderate.
The yen has been struggling in recent months near its lowest in 30 years due to Japanese interest rates lagging other major economies. Market players have pointed to yen weakness as a key reason for the BOJ to hike rates.
The BOJ’s next policy meeting is on January 23-24, and the central bank will release its review of monetary easing tools, including negative interest rates, in the coming weeks. The review warns against relying solely on unconventional measures as a substitute for traditional tools like interest rate cuts.
Source: https://www.reuters.com/markets/asia/boj-meets-final-rate-review-this-year-trump-risk-clouds-outlook-2024-12-18