The Bank of Japan stated that the uncertainty, including the impact of trade policies, remains very high, and exports and production may continue to show weakness, with attention on the inflationary pressures arising from the rise in domestic food prices. The market will closely monitor any guidance from Governor Ueda Haruhiko during the afternoon's press conference regarding future interest rate hikes.
The Bank of Japan has kept interest rates unchanged for the second consecutive time, emphasizing that there is "extremely high uncertainty" regarding trade policies.
On May 1, Thursday, the Bank of Japan voted 9-0 to approve the latest interest rate resolution, maintaining the rate at 0.5%. This marks the second consecutive time the bank has opted for "no action," aligning with market expectations.
In the resolution statement, the Bank of Japan stated that the overall financial system in Japan remains stable. Consumer spending is expected to maintain a modest upward trend, and economic growth will accelerate; however, households' defensive attitude towards spending may further increase and could pose downward pressure on the economy.
Regarding the impact of tariffs, the statement indicated that the uncertainty related to trade policy remains extremely high. Exports and output may continue to show weakness, and the long-term high uncertainty of trade and other policies across countries may lead businesses to focus more on cost-cutting.
The statement further pointed out that if global logistics are interrupted or if supply chains are restructured leading to significant costs, import prices may rise. This could subsequently suppress domestic demand.
On inflation, the bank stated that core inflation is expected to reach the Bank of Japan's target in the latter half of the forecast period. Additionally, with the recent rise in food prices (such as rice prices), it is necessary to pay attention to how these increases may have a second-round effect on overall inflation through changes in household sentiment and inflation expectations.
The statement also reiterated the need to closely monitor the impact of Forex and other market fluctuations on the Japanese economy and prices.
Considering the uncertainty of geopolitical issues and the recent strength of the yen, the market will closely watch for any guidance on future interest rate hikes from Bank of Japan Governor Kazuo Ueda at this afternoon's press conference.
Previous articles mentioned that Bank of Japan officials generally believe there is no need to change the gradual interest rate hike stance and prefer to wait for more data before making a decision.
After the resolution was announced, the yen dropped briefly, $USD/JPY (USDJPY.FX)$ quoted at 143.47.
The Nikkei 225 Index increased by 0.54%.
Editor/Somer