The Bank of Japan (BOJ) yesterday kept its monetary policy unchanged, avoiding a repetition of the market meltdown that followed its July rate hike while keeping the path open for continuing to raise borrowing costs in the coming months.
The immediate market reaction was muted, with stocks maintaining their gains and only a relatively small shift in the value of the yen after the BOJ met expectations by holding the unsecured overnight call rate steady at 0.25 percent. Following BOJ Governor Kazuo Ueda’s news conference, where he seemed to suggest there was a little more time to pause, the yen weakened from about ￥141.80 to ￥143.60 against the US dollar.
In a busy week for central banking that saw the US Federal Reserve finally embark on rate cuts, the BOJ was expected to stand pat by all economists surveyed by Bloomberg.
Photo: Bloomberg
“The upside risk to prices does appear to be easing given the recent yen strength,” Ueda said.
“There’s some time to confirm certain points when making policy decisions,” he added, referring to the importance of checking moves in financial markets and the state of overseas economies.
A hold decision seemed almost certain given the need to monitor the impact of July’s rate increase and to avoid spooking markets again with a surprise. Holding steady also kept the bank out of the spotlight as Japan’s Liberal Democratic Party chooses a new leader on Friday next week to take on the role of prime minister.
The bank raised its assessment of consumer spending, a key engine of economic growth, and cited the need to monitor financial markets. Following another uptick in the inflation rate, it also reiterated that it expects price growth to continue in line with its target for the latter half of its projection period.
“The BOJ is indicating it’s on track for another rate hike,” said Jin Kenzaki, head of Japan research at Societe Generale SA.
Most economists doubt that the central bank would hike at its meeting next month, partly due to the possibility of a national vote in Japan just before the US chooses its next president in early November.
“October seems too early given the likelihood of not enough data to back up an additional hike and a general election likely taking place soon after the LDP election,” Kenzaki said.
“I continue to expect that the next move will take place in December,” he said.
Market pricing indicates investors are less convinced than economists that the central bank would move again by the end of the year. Overnight index swaps, which tend to be volatile, yesterday veered between suggesting zero and 77 percent odds of a 25 basis-point hike this year. About 70 percent of economists surveyed by Bloomberg expect another increase by December.
The BOJ removed from its policy statement a mention of its stance on continuing to raise the policy rate if its outlook for economic activity is met. The bank previously used this language in an explanation of its rate hike decision and policy direction in July. While the removal of the line matched the pattern of explanatory text in recent statements, its earlier repeated inclusion might have overemphasized the BOJ’s appetite to hike.
“Ueda will probably balance two main considerations — the risk that a hawkish BOJ sets off more market turbulence, against growing confidence backed by recent data on wages and prices that its 2 percent inflation target is increasingly secure. Our baseline view is that Ueda will send a subtle signal that the BOJ will be prepared to hike in October, if conditions are right then,” Bloomberg economist Taro Kimura said.
Intel Corp chief executive officer Lip-Bu Tan (陳立武) is expected to meet with Taiwanese suppliers next month in conjunction with the opening of the Computex Taipei trade show, supply chain sources said on Monday. The visit, the first for Tan to Taiwan since assuming his new post last month, would be aimed at enhancing Intel’s ties with suppliers in Taiwan as he attempts to help turn around the struggling US chipmaker, the sources said. Tan is to hold a banquet to celebrate Intel’s 40-year presence in Taiwan before Computex opens on May 20 and invite dozens of Taiwanese suppliers to exchange views
Application-specific integrated circuit designer Faraday Technology Corp (智原) yesterday said that although revenue this quarter would decline 30 percent from last quarter, it retained its full-year forecast of revenue growth of 100 percent. The company attributed the quarterly drop to a slowdown in customers’ production of chips using Faraday’s advanced packaging technology. The company is still confident about its revenue growth this year, given its strong “design-win” — or the projects it won to help customers design their chips, Faraday president Steve Wang (王國雍) told an online earnings conference. “The design-win this year is better than we expected. We believe we will win
Power supply and electronic components maker Delta Electronics Inc (台達電) yesterday said it plans to ship its new 1 megawatt charging systems for electric trucks and buses in the first half of next year at the earliest. The new charging piles, which deliver up to 1 megawatt of charging power, are designed for heavy-duty electric vehicles, and support a maximum current of 1,500 amperes and output of 1,250 volts, Delta said in a news release. “If everything goes smoothly, we could begin shipping those new charging systems as early as in the first half of next year,” a company official said. The new
Quanta Computer Inc (廣達) chairman Barry Lam (林百里) is expected to share his views about the artificial intelligence (AI) industry’s prospects during his speech at the company’s 37th anniversary ceremony, as AI servers have become a new growth engine for the equipment manufacturing service provider. Lam’s speech is much anticipated, as Quanta has risen as one of the world’s major AI server suppliers. The company reported a 30 percent year-on-year growth in consolidated revenue to NT$1.41 trillion (US$43.35 billion) last year, thanks to fast-growing demand for servers, especially those with AI capabilities. The company told investors in November last year that
RSS