Get the latest updates on the Bank of Japan’s monetary policy! Learn how the reduction of Japanese government bond purchases may impact the economy and what it means for you.
The Bank of Japan is moving further towards pulling down its vast monetary stimulus. The Bank of Japan announced on Friday that it would begin lowering its large bond purchases and reveal a comprehensive strategy for shrinking its almost $5 trillion balance sheet next month.
In addition, Governor Kazuo Ueda hinted that the BOJ was sticking to its hard approach. despite recent signs of weakness in consumption and the overall economy, he would not rule out increasing interest rates in July. This is because the weakening yen drives up import prices.
BoJ’s latest move and its potential impact
However, after gathering feedback from market players, the bank announced the specifics of its bond reduction strategy. In the upcoming year or two, we can expect this strategy to work. Its next meeting will take place on July 30-31.
Of course, they may decide whether or not to raise interest rates and modify the level of monetary assistance in July. This will depend on the economic and pricing statistics that become available at that point, according to sources.
Japan’s GDP dropped 0.5% in January-March compared to the same quarter last year, or 1.8% annually, as consumer inflation moderated rather than increased. “The BOJ finds it hard to justify taking a tightening move immediately,” says Tomoaki Shishido, strategist at Nomura.
What does it mean for your investments?
The BOJ maintained its short-term policy rate goal in the range of 0-0.1% by a unanimous vote, as was generally predicted. Additionally, it did not alter the monthly bond purchase pace, which remains at about 6 trillion yen ($38 billion). However, some market participants saw the central bank’s decision to hold off until July as a sign that it will proceed cautiously in making future monetary policy adjustments.
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