Bank of Japan keeps ultra-low rates, dovish policy guidance

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The Bank of Japan maintained ultra-low interest rates and dovish policy guidance on Thursday, reassuring markets that it will continue to swim against a global tide of central banks tightening monetary policy to combat soaring inflation.

Here are some analysts’ views on the move and market reaction:

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SHIGETOSHI KAMADA, GENERAL MANAGER – RESEARCH DEPARTMENT, TACHIBANA SECURITIES, TOKYO

“The outcome was in line with our expectations. It became clearer that the Bank of Japan will continue to be committed to support the economy. The yen fell to 145 yen to the dollar for a moment (after the announcement). Unstable move of the yen increases uncertainties of Japanese stocks. Even as some companies benefit from the weak yen, some suffer as costs increases so in total that is going to be a worry.

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“For a while Wall Street move will remain as the main market cue for the Japanese stock market.”

HIROAKI MUTO, ECONOMIST, SUMITOMO LIFE INSURANCE CO, TOKYO

“The BOJ was aware that an announcement like this should surely prompt a weak yen beyond 145 per dollar.

“Although the statement says “we must be vigilant at financial, currency market moves,” looking at how the BOJ communicates, it doesn’t seem they are seriously mindful of that. They might be thinking a weak yen beyond 145 level is not a bad thing that will bring negative impacts to the economy.”

TAKESHI MINAMI, CHIEF ECONOMIST, NORINCHUKIN RESEARCH INSTITUTE, TOKYO

“While the monetary policy decisions in the United States and Japan were both as expected, U.S. interest rates actually rose so that caused the yen to weaken somewhat. That trend is likely to continue.

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“The difference in direction of U.S. and Japan’s monetary policy has caused the yen to depreciate…. Unless U.S. interest rates peak, there won’t be any relief in the pressure on the yen to depreciate and interest rates to rise.

“It’s true that Japan’s economy is weak…. The BOJ is right in maintaining the status quo, considering the risk that raising interest rates pose and the harm that would do to current conditions.”

SAKTIANDI SUPAAT, REGIONAL HEAD OF FX RESEARCH & STRATEGY, MAYBANK, SINGAPORE

“I think the next level at 147 is a possibility. Going forward, yen weakness I think it’s built in relatively to the dollar, especially with the rate differential being one of the big drivers.

“Eventually, an intervention may come. If it’s too rapid a move toward 147 and beyond, I think the intervention layer will come in. The verbal warnings have come in, the rate checks have come in, the next level would definitely be intervention.”

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YASUNARI UENO, CHIEF MARKET ECONOMIST, MIZUHO SECURITIES, TOKYO

“The BOJ’s decision may have been taken into account the fact that the Fed announcement overnight on raising interest rates by 0.75% had caused little reaction in the currency market. As it turned out, the both central banks’ decisions were pretty much factored into the currency market.”

“We’re closely watching what Kuroda may say about recent sharp yen weakening lately. He has said lesser about any merit of the weak yen recently out of consideration towards public sentiment against rising costs of living.”

“Kuroda will probably underscore concerns about impacts from the weak yen on the economy, although he will steer clear of directly commenting on currency policy which falls in the jurisdiction of the Ministry of Finance, not the BOJ.”

(Reporting by Tokyo newsroom; Compiled by Rashmi Aich)