Japan: No changes to the BoJ monetary stance – UOB

Senior Economist at UOB Group Alvin Liew reviews the latest BoJ monetary policy meeting.

Key Takeaways

“The Bank of Japan (BoJ) kept its policy measures unchanged at last Monetary Policy Meeting (MPM) helmed by exiting BoJ Governor Kuroda. The decision was unanimous, and the BoJ kept steadfastly to its easing stance. Post-BoJ announcement saw a jump of the USD/JPY above 136 while the Nikkei stock index fell.”

“BoJ Outlook – To Shift Or Not To Shift YCC Policy, That Will Now Be Under The New BoJ Governor Ueda: With Kuroda’s last MPM decision now out of the way, the attention will shift to Kazuo Ueda who is likely to win approval from the Upper House of the Diet today as the new BoJ Governor. While we see an exit from the YCC and negative interest rates is inevitable for Japan, the question is how Ueda will execute his plan. We believe Ueda will proceed at a gradual, well-telegraphed pace, and not a sharp and sudden reversal. We see it in two broad steps, 1) Protracted adjustment to its forward guidance on YCC and interest rates (Apr to Dec 2023) and 2) Scrapping of YCC and lifting of the negative policy rate in early 2024.”

“The next BoJ MPM on 27-28 Apr will be widely watched event given that it will be the first BoJ decision under Ueda and the outcome of the Shunto (annual wage negotiation) will be out by then, and it will include an updated Outlook Report (The Bank's View).”