BoJ Summary of Opinions: Members see further rate hikes if outlook materializes
The Bank of Japan (BoJ) published the Summary of Opinions from the January monetary policy meeting, with the key findings noted below.
Key quotes
One member said no need to worry excessively about impact on corporate profits provided rate hike pace is not too fast.
One member said appropriate to keep raising policy rate if BOJ economic and price projections materialize.
One member said current financial conditions remain significantly accommodative given economic strength and fallout from recent weak yen.
One member said as we have done so far, Bank of Japan should raise rates while examining how economy and markets respond to each policy shift.
One member said risk of BOJ being behind the curve has not necessarily become evident yet, yet it is becoming even more important for BOJ to conduct monetary policy carefully and timely.
One member said if overseas rate environments change this year, there is risk BOJ could unintentionally fall behind the curve.
One member said as foreign exchange market players pay attention to real interest rate differentials, BOJ must adjust current significantly negative real policy rate.
One member said yen fall and rise in long-term rates largely reflect fundamentals so only prescription from monetary policy perspective is to raise policy rate in timely and appropriate manner.
One member said BOJ should not take too much time examining impact of rate hike and proceed with next rate hike without missing appropriate timing.
One member said BOJ should raise policy rate every few months.
One member said developments seen in Japan Government Bond market over past two weeks or so have been a one-sided steepening of yield curve that warrants attention
One member said BOJ should stick with current thinking and continue reducing its bond purchases while responding to exceptional circumstances by, for example, increasing purchases.
One member said JGB market volatility, especially for super-long notes, has increased so BOJ should consider taking flexible action in exceptional cases including purchases of JGBs.
One member stated that when there is an increase in bond market volatility, it is important for a central bank to examine whether market functioning is maintained.
One member said weak yen increases profits and wages of large firms but weighs on those of smaller firms, and thus could lead to wider inequality.
One member said inflation has started to become persistent.
One member said pass-through to prices of higher import prices caused by weak yen has become more noticeable.
One member said it has become more probable that exchange rate factors will push up prices.
One member said it is necessary to pay more attention to upside risks to prices.
One member said since the economy faces labor supply constraints, risks to prices have become skewed toward the upside.
Market reaction
Following the BoJ’s Summary of Opinions, the USD/JPY pair is up 0.28% on the day to trade at 155.18 as of writing.
Japanese Yen Price Today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the weakest against the Euro.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.04% | -0.05% | 0.17% | 0.10% | 0.12% | 0.03% | 0.00% | |
| EUR | 0.04% | -0.01% | 0.20% | 0.15% | 0.16% | 0.07% | 0.04% | |
| GBP | 0.05% | 0.00% | 0.00% | 0.16% | 0.18% | 0.08% | 0.05% | |
| JPY | -0.17% | -0.20% | 0.00% | -0.05% | -0.04% | -0.12% | -0.15% | |
| CAD | -0.10% | -0.15% | -0.16% | 0.05% | 0.01% | -0.08% | -0.11% | |
| AUD | -0.12% | -0.16% | -0.18% | 0.04% | -0.01% | -0.09% | -0.12% | |
| NZD | -0.03% | -0.07% | -0.08% | 0.12% | 0.08% | 0.09% | -0.04% | |
| CHF | -0.00% | -0.04% | -0.05% | 0.15% | 0.11% | 0.12% | 0.04% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
This section was published on February 1 at 22:27 GMT as a preview of the BoJ Summary of Opinions release.
The BoJ Summary of Opinions Preview
The Bank of Japan (BOJ) will publish its report on Sunday at 23:50 GMT. This report includes the BOJ's projection for inflation and economic growth. It is scheduled 8 times per year, about 10 days after the Monetary Policy Statement is released.
How could the BoJ Summary of Opinions affect USD/JPY?
USD/JPY trades on a positive note on the day in the lead up to the BoJ Summary of Opinions. The pair edges higher as the US Dollar (USD) strengthens after former Federal Reserve (Fed) Governor Kevin Warsh was selected to be the next Fed chair.
The first upside barrier for the USD/JPY pair is seen at the January 23 high of 159.81. The next resistance level emerges at the 160.00 psychological level, en route to the January 14 high of 161.00.
To the downside, the 100-day Exponential Moving Average (EMA) of 154.50 will offer some comfort to buyers. Extended losses could see a drop to the January 30 low of 152.50. The next contention level is located at the January 29 low of 151.95.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
Author
Lallalit Srijandorn
FXStreet
Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.
