BoJ Leaves Policy, Forward Guidance and Easing Bias In Place

As largely expected, the BoJ has delivered no changes in policy, forward guidance or its explicit easing bias. There have also been no signals regarding the termination of the Negative Interest Rate Policy (NIRP).

• The upper bound reference on long-term yields has been maintained at 1%.
• In short, the BoJ sees the price trend to rise to goal toward the end of the projection period, with the risks more or less balanced for the economy and prices.
• Concerning the Outlook Report, the BoJ said “Toward the end of the projection period, underlying CPI inflation is likely to increase gradually toward achieving the price stability target, as the output gap turns positive and as medium- to long-term inflation expectations and wage growth rise. The likelihood of realizing this outlook has continued to gradually rise, although there remain high uncertainties over future developments.”
• The last sentence around realising the outlook wasn't in the Oct outlook report from 2023. Still the BoJ notes in today's outlook report that high uncertainties remain.
• In terms of forecasts, FY24 Core CPI has been downwardly revised to 2.4% y/y from 2.8% but FY25 has been upwardly revised slightly to 1.8% from 1.7% previously. A more hawkish development would have been if the 2025 forecast was at or above 2%.
• FY24 & FY25 Core Ex-Energy CPI forecasts were left unchanged at 1.9%.
• FY24 GDP forecast has been lifted to 1.2% y/y from 1.0% previously.