Reuters reported on Thursday, citing five sources familiar with the Bank of Japan’s (BoJ) internal discussions, that the Japanese central bank is considering keeping interest rates unchanged at its upcoming meeting next week. Policymakers are reportedly inclined to spend more time assessing external risks and gathering data on next year’s wage trends before making any significant decisions.
One source stated, “Policymakers prefer to spend more time scrutinizing overseas risks and clues on next year’s wage outlook,” highlighting concerns about the global economic environment. Another source emphasized that “Japan isn’t in a situation where imminent rate hikes are needed,” pointing to the country’s current economic conditions. A third source added, “With inflation benign, Japan can afford to spend time reviewing various data,” a sentiment echoed by two additional sources.
A key factor influencing the BoJ’s cautious stance is the view that the primary economic risks for Japan stem from external factors, particularly sluggish global demand, which could negatively impact corporate profits and, in turn, dampen their willingness to increase wages.
Despite these challenges, sources indicated that the BoJ remains confident in Japan’s domestic economic trajectory, maintaining its assessment that consumption is “increasing moderately as a trend.”
Market Reaction
The Japanese Yen weakened following the news, with the USD/JPY pair rebounding from an intraday low of 151.95 to near 152.50 in the Asian session. The Yen’s brief dip was attributed to market expectations of a dovish stance from the BoJ as it continues to prioritize external risks and inflation data.
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