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Japan: Policy Rate Held At 0.25% (Consensus 0.25%) in Dec-24

• The BoJ kept its policy rate at 0.25%, aligning with consensus expectations. Domestic recovery and stabilising inflation reduced the need for immediate policy adjustments.
• It forecasts inflation to stabilise near the 2% target by fiscal 2025, supported by an improving output gap and rising medium-term inflation expectations, despite external risks and commodity price fluctuations.
• The BoJ’s review of its monetary policy emphasised flexibility in achieving sustainable inflation, with a continued focus on balancing growth-supportive measures against evolving domestic and global risks.

Japan: Policy Rate Held At 0.25% (Consensus 0.25%) in Oct-24

• The Bank of Japan held its policy rate at 0.25%, aligning with consensus expectations and reinforcing a supportive stance for sustained wage-price cycles.
• Inflation is projected to stabilise around the 2% target by fiscal 2025, although risks from global economic and commodity prices could skew inflationary pressures upward.
• Any rate increases remain conditional on external developments, particularly concerning the US economy’s impact on Japan’s inflation and currency dynamics.

Japan Policy Rate 0.25% (consensus 0.25%) in Sep-24

• The BOJ maintained its policy rate at 0.25%, consistent with expectations, sustaining globally accommodative financial conditions to support economic growth and wage inflation.
• Global economic conditions, domestic inflation trends, wage-price dynamics, and exchange rate fluctuations will influence future interest rate decisions.
• The BOJ’s current stance reflects a gradual approach to inflation management, focusing on monitoring wage growth and price stability before making significant policy adjustments.

No Alarm From Global Cycle

• Broad increases in the flash services PMIs reinforced the signal that global activity remains resilient enough not to require forceful monetary easing.
• Residual seasonality hasn’t appeared in the PMIs again this summer, but it pollutes some unemployment data. A slight majority of countries have a higher UR than a year ago.
• Softening labour market trends from a relatively neutral cyclical position are consistent with gradual and limited rate cuts, even if they need reversing without a recession.

By Philip Rush