The Bank of Japan’s (BoJ) former policy board member, Makoto Sakurai, said that the central bank “is completely ready” to end negative rates in April 2024.
Key quotes
“The BOJ is completely ready.”
“They are just waiting for one last push from one or two economic data.”
“April is the most likely timing for a rate hike after authorities peruse initial results of spring wage talks due in March.”
“The BOJ will only go slowly. It’s completely different from” the Federal Reserve and European Central Bank.”
“What Japan’s economy needs is the continuation of an appropriate level of monetary easing.”
Market reaction
USD/JPY edges lower following the above comments from the former BoJ policymaker. At the time of press, the pair was down 0.11% on the day at 145.64.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan has embarked in an ultra-loose monetary policy since 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds.
The Bank’s massive stimulus has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy of holding down rates has led to a widening differential with other currencies, dragging down the value of the Yen.
A weaker Yen and the spike in global energy prices have led to an increase in Japanese inflation, which has exceeded the BoJ’s 2% target. Still, the Bank judges that the sustainable and stable achievement of the 2% target has not yet come in sight, so any sudden change in the current policy looks unlikely.
Source: https://www.fxstreet.com/news/ex-bojs-sakurai-bank-of-japan-is-fully-prepared-to-end-negative-rates-in-april-2024-202401102309