Morning Brief – Bank of Japan unchanged

The USDJPY pair remained steady above the 140.00 level Bank of Japan kept its key short-term interest rate unchanged at -0.1% and that of 10-year bond yields at around 0% during its June meeting by a unanimous vote.

Economists have been watching for changes to the BOJ’s yield curve control policy, which aims to keep 10-year Japanese government bond yields around 0%.

Notably, the BOJ made an amendment to the principal terms and conditions of the Complementary Deposit Facility. However, there was no change in the framework of the Complementary Deposit Facility and the interest scheme to promote lending.

The central bank of Japan made several comments on the economy and sounded relatively upbeat with comments such as “Japan’s economy picking up” and “Japan’s economy likely to continue recovering moderately.”

Japan’s core consumer inflation likely to slow pace of increase towards middle of current fiscal year and Inflation expectations moving sideways after heightening.

The Consumer Price Index in Japan increased 0.60 percent in April of 2023 over the previous month. The annual inflation rate in Japan rose to 3.5% in April 2023 from March’s 6-month low of 3.2%, as food prices increased the most since August 1976 (8.4% vs 7.8% in March). 

Note that the BOJ again repeated that it expects the pace of inflation to slow from the middle of this Fiscal Year. This would be around September/October 2023.

Some morning counters think as Japan finance minister Suzuki came out on the wires and said he has no comment on FX levels. However, such comments from him usually precede a huge tirade from him on FX levels.