- Bank of Japan is expected to keep interest rates at 0.50% at the May meeting.
- Uncertainty related to the United States inspired trade war will be at the center of the decision.
- The Japanese Yen could relax further with the anticipated decision of BOJ.
Bank of Japan (BOJ) will declare its decision on monetary policy after a two -day meeting on Thursday, and the benchmark interest rate will be placed at 0.50%to the policy makers widely estimated to the market participants.
The focus will then be transferred to any signal of monetary policy functions in the future, with new economic estimates, with reaction to Japanese yen (JPY) result.
What to expect from BOJ interest rate decision?
As stated, the Japanese Central Bank will probably maintain interest rates at the highest level at 0.50%in 17 years. The BOJ increased the 25 basis points (BPS) in January amid progress towards the target of 2% of its 2% inflation, but patted in March.
Regarding estimates, BOJ increased 1.1% GDP (GDP) for FY 2025 and an increase of 1% for FY 2026 in January. Such a figure may face an amendment amidst the ongoing trade war, given that Japan is an export-dependent economy. Additionally, the average approach for consumer inflation was 2.4% and 2% for two years.
Meanwhile, the United States (US) -Suppired Trade War continues, creates uncertainty about the progress of economic and inflation. Without progress in negotiations, Japan will possibly reduce capital investment in exports with a contraction and inflation increase. This means that Japanese policy makers must choose to hold rates until a clear picture emerges.
Prior to the announcement, Japanese Prime Minister Shigeru Ishiba announced some emergency economic measures in mid -April, which reduces some emergency economic measures to reduce any impact on American levy -affected industries and families. The package includes support for corporate financing and subsidy by 10 yen ($ 0.07) by one liter (0.26 gallons) to reduce petrol prices, and partially covers the electricity bill for three months from July.
In addition, Japan’s economy minister, Riocy Akajawa, who is in charge of the trade talks with the US, reiterated that he expects to completely remove the levy. Next to this, he clarified that the government is not considering renouncing agricultural products for auto in talks.
Finally, BOJ Governor Kazuo Uaida said last week that the bank would continue to carefully monitor the economic and price data regarding the interest rate policy. The UEDA will hold a press conference after the announcement, and their words will be examined for clues on future monetary policy decisions.
As a color note, the US on Wednesday published the first-tier data. The ADP employment change report showed that the private sector added 62K new job posts in April, which is much poorly from the 108k from the market participants. The initial estimate of the US Q1 GDP also missed expectations, as the economy contracted at an annual speed of 0.3% against the anticipated 0.4% expansion. Statistics speculated that the US has to face a slowdown between Trump’s tariffs, and the financial markets took a risk before the Boj’s decision.
How can Bank of Japan’s interest rate decision affect USD/JPY?
Generally, the decisions of markets in Central Bank decisions, which means that the decisions according to the expectations should have limited impact on JPY. Policy makers are expected to remain data-dependent. However, amendment of the expectations can weigh on the Japanese currency.
A landscape in which BOJ officials are optimistic about the progress of economic and inflation are not quite likely, but as a result it should be a strong JPY. Given that the USD/JPY will be reduced after BOJ’s decision.
Valeria Bednarik, the main analyst of Fxstreet, says: “The USD/JPY pair falls around 143.00 in the US session before the announcement of BOJ, moves forward for the second day in a row, but the rapid capacity looks well. In the daily chart, a bearish 20, also, while in about 143.70, in about 143.70, rapid resistance in about 143.70s, however, the technical indication levels, so on, the technical indicators are highly upwards. Reflect the tendency of recession.
Bednarik says: “Should BOJ give a Hawkish message, the risk for USD/JPY turns to the negative side, provides immediate support with a 142.00 mark, on April 23 at 141.35 daily. The additional sales pressure highlights the year less on 139.88.”
economic indicators
Boj interest rate decision
Bank of Japan (BOJ) announced its interest rate decision after each of the eight scheduled annual meetings of the bank. Generally, if the BOJ is a hawkish about the inflationary approach of the economy and increases the interest rates, it is rapid to the Japanese yen. Similarly, if the boj has a dowish view on the Japanese economy and keeps interest rates unchanged, or bites them, it is usually a slowdown for JPY.
Read more.
Next release:
Thu May 01, 2025 03:00
frequency:
irregular
Unanimous:
0.5%
Of earlier:
0.5%
Source:
Bank of japan
Bank of japan
Bank of Japan (BOJ) is a Japanese central bank, which determines monetary policy in the country. Its mandate is to issue banknotes to ensure value stability and to do currency and monetary control, which means a inflation target of about 2%.
Bank of Japan entered an ultra-lux monetary policy in 2013 to stimulate the economy and fuel inflation amid low-affected environment. The bank’s policy is based on quantitative and qualitative spontaneity (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled on its strategy and loosen the policy by starting negative interest rates and then directly by controlling the yield of its 10 -year government bonds. In March 2024, BOJ removed the interest rates, effectively the ultra-lux withdrawn from the monetary policy trend.
The bank’s massive excitement depreciated Yen against its main currency peers. The process increased due to increasing policy deviations between Japan and other main central banks in 2022 and 2023, which opted to rapidly increase interest rates to fight decades-high levels of inflation. The BOJ policy created a widespread difference with other currencies, with the value of the yen down. The trend was partially reversed in 2024, when BOJ decided to give up its ultra-lux policy attitude.
Spikes in a weak yen and global energy prices led to an increase in Japanese inflation, which crossed the 2% target of BOJ. Possibility of increasing salary in the country – a major element promoting inflation – also contributed to this step.
