The Bank of Japan is widely expected to keep its monetary stimulus unchanged Friday, with traders focusing on any remarks Governor Kazuo Ueda might make on negative interest rates or the correlation between currencies and policy as the yen trades near a 10-month low.
All 46 economists surveyed by Bloomberg predict no adjustments to the interest rate or yield curve control after the bank tweaked its YCC settings at the last gathering in July.
Traders will look for the governor to clarify his comments or discuss the market’s reaction to them. Ueda usually holds a press conference at 3:30 p.m. after the bank releases its policy statement around noon. Friday marks the one-year anniversary since Japan’s first yen-buying intervention in 24 years. A year ago, then-BOJ chief Haruhiko Kuroda pledged after a board meeting to continue with easing. That helped fuel a further slide in the yen that prompted the government to buy the currency.
At the same time, if Ueda sends strong signals on normalizing policy, yields on 10-year government bonds could hover closer to the bank’s de-facto ceiling at 1%, a development that would likely force the BOJ to buy more bonds, exacerbating the side effects of yield control. The 10-year yield touched a fresh nine-year high of 0.725% on Wednesday.
How Ueda characterizes the chances of a rate hike in early 2024 will be under close scrutiny. While he is likely to cite the possibilities of moving both early or late, traders will look for any emphasis in either direction.
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