The Bank of Japan announces no change in its policy, as expected

The Bank of Japan’s main policy rules remain unchanged:

• Short-term interest rate target -0.1%
• The 10-year bond yield is around 0%, but flexible up to 1% (in October 2023, the bank made it more flexible by saying that 1% is just a “reference”)

No changes are being made to future monetary policy guidance

—

No change in core inflation expectations:

• Average Core CPI Forecast for FY2023 at +3.8 vs. +3.8% expected in October Outlook Report

• Average core CPI forecast for FY2024 at +1.9% vs. +1.9% in October
• Average core CPI forecast for FY2025 at +1.9% vs. +1.9% in October

But basic expectations were trimmed:

• Average core CPI forecast for FY2023 at +2.8% vs. +2.8% in October
• Average core CPI forecast for FY2024 at +2.4% vs. +2.8% in October
• Average core CPI forecast for FY2025 at +1.8% vs. +1.7% in October

GDP forecast:

• Fiscal year 2023 1.8% compared to 2.0% in October
• Fiscal year 2024 1.2% compared to 1.0% in October
• Fiscal year 2025 1.0% compared to 1.0% in October

Bank of Japan quarterly report:

• The risks to economic activity are generally balanced
• The need to closely monitor whether the virtuous cycle between wages and prices will intensify
• The QQE program will continue with YCC as long as necessary
• You will not hesitate to take additional mitigation steps if necessary
• The Bank of Japan will patiently continue its monetary easing policy while responding nimbly to developments
• The Japanese financial system has generally maintained stability

• Uncertainty remains but the probability of achieving sustainable 2% inflation continues to rise gradually

• The Japanese economy is likely to continue to recover moderately
• You should be alert to financial movements in the foreign exchange market and their impact on the Japanese economy and prices
• Inflation expectations are gradually rising
• Core consumer inflation moved below 2.5%, partly reflecting a moderate rise in service prices
• Consumption continues to rise moderately
• Inflation is likely to gradually accelerate towards the Bank of Japan’s target until the end of the period forecast in the quarterly report
• Japan’s output gap is improving and is likely to gradually widen in the future
• Inflation expectations in the medium and long term are gradually rising
• Positive cycle of rising wages and inflation to reinforce

—

There is still more focus, which is the press conference that Bank of Japan Governor Ueda will hold at 0630 GMT.