- ✔Japan’s central bank kept its key policy rate steady at 0.5% at Wednesday’s conclusion of a two-day meeting.
✔The move, which was in line with market expectations, comes ahead of the U.S. Federal Reserve’s policy meeting, where the central bank is expected to keep its benchmark interest rate steady. ✔Analysts are of the view that the BOJ will soon raise interest rates, but are split on the timing for the next hike.
Japan’s central bank on Wednesday kept its key policy rate steady at 0.5% in a unanimous vote, as the export-reliant country assesses the potential impact of U.S. President Donald Trump’s protectionist trade policies on its economy.
The move, which was in line with market expectations, comes ahead of the U.S. Federal Reserve’s policy meeting, where the central bank is expected to keep its benchmark interest rate steady.
“Japan’s economy has recovered moderately, although some weakness has been seen in part,” BOJ policymakers said in a statement, while cautioning of “high uncertainties surrounding Japan’s economic activity and prices, including the evolving situation regarding trade ... and domestic firms’ wage -and price-setting behavior.”
The bank is seen to be referring to reciprocal tariffs and sector-specific tariffs that Trump is expected to announce on April 2., said Hiroki Shimazu, chief strategist at MCP Asset Management Japan.
Following the rate decision, the Japanese yen was little moved, trading at 149.46 against the U.S. dollar. The benchmark Nikkei 225 index was up 0.69%.
Analysts are of the view that the BOJ will soon raise interest rates, but are split on the timing for the next hike.
Fred Neumann, chief Asia economist at HSBC, said the BOJ could next raise interest rates in June.
“June looks more likely. The market is a little bit after that, probably July is sort of what the market is thinking right now. We think a little bit earlier in June,” Neumann told CNBC’s “Squawk Box Asia” on Wednesday.
“It’s not just contingent on the Fed. It’s actually contingent on the BOJ getting some evidence that really wage increases are percolating through the economy,” Neumann said.
“We only just had the major unions negotiate, we don’t know what the smaller unions are doing, we don’t know what small or medium-sized enterprises are doing, so the BOJ tends to wait until June to get all the evidence on wages and then they can pull the trigger,” he added.
The BOJ raised short-term rates to 0.5% from 0.25% in January, its highest level since 2008, after ending a massive stimulus program last year. The central bank has signaled its readiness to hike rates further if the economic growth and inflation moves in line with its projections.
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