The Bank of Japan is predicted to leave its base rate unchanged on Thursday just hours after the Federal Reserve cut the fed funds rate for the second time and weeks after the European Central Bank restarted it quantitative easing bond purchases.

Governor Haruhiko Kuroda prompted speculation that the bank may be considering joining its Asian, European and American colleagues in providing economic support when he said that the bank was “more positive” about  adding stimulus at the July bank meeting. He also said the bank could lower its already negative short term rates if economic conditions warrant.

The overnight call rate has been at -0.1% since February 2016.  For the eight years before that it was at 0.1%.  It has not been above 0.5% since September 1995.


The almost two year US China trade dispute has taken a toll on Japanese exporters and factories adding to the drag from slowdown in global growth.

Japan and its central bank face a unique problem in that its main interest rate has been below zero for the longest period of any major industrial economy. 

The dilemma for the bank is that even if it moved rates below their current -0.1% it is doubtful that it would foster economic activity.

The bank could alternatively expand asset purchases but the purpose of that would be the same, to lower rates.  The problem for the BOJs that lower interest rates function as a stimulus by making cash and loans more available. That works if there is a relative change in access. In Japan’s case by there is no shortage of liquidity. Business are not expanding more rapidly because the demand for their products is lackluster, domestically and increasingly from overseas.  

The yen has strengthened 5.4% against the dollar over the past year, but it has weakened 3.4% in the past three weeks and has moved away from the 100 yen level that analysts consider a red line for the BOJ policymakers.

For Japan and the BOJ about the only sure help for their economy would be a US China trade deal. Unfortunately that is not one of Mr. Kuroda’s options.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.

Analysis feed

Latest Forex Analysis

Editors’ Picks

EUR/USD nears weekly highs as risk-on returns

The EUR/USD pair was dragged higher by a soaring Pound, now hovering around 1.1040. The market is all about sentiment, and this last dependent on Brexit and the US-China trade relationship.



GBP/USD surges to 5-month highs on reports of a draft Brexit deal

GBP/USD has leaped toward 1.28, hitting the highest since May. Reports suggest that the UK and the EU are zooming in on a deal. Details are awaited and negotiations continue.


USD/JPY in search of a firm direction, stuck in a range below mid-108.00s

The prevalent risk-on mood weighed on the JPY’s safe-haven status and extended support. A sharp fall in the US bond yields undermined the USD and failed to impress bullish traders.


Cryptos: Incumbents don't know to play well

The Libra project led by Facebook remains on track despite the first defections. Those who have abandoned the project are mostly payment gateways. Bitcoin's lack of tone weighs on Ethereum's mood.

Read more

Gold slumps to $1,480 area on Brexit hopes

The troy ounce of the precious metal continued to weaken in USD terms in the American trading hours as markets cheered reports claiming that the European Union (EU) and the United Kingdom (UK) are closing in on a draft Brexit deal that could be announced before the end of the day on Tuesday.

Gold News

Forex Majors