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MNI BoJ Preview - April 2024: ‘Wait And See’ Approach, Alert To Messaging On JGB Purchases & Currency Weakness

At this week’s meeting, we expect the BoJ to maintain its target range for the uncollateralized overnight call rate at 0-0.1%.

Central Bank PreviewBoJ - PreviewHomepageCentral Bank ReportsMarkets

EXECUTIVE SUMMARY

  • At this week’s meeting, we expect the BoJ to maintain its target range for the uncollateralized overnight call rate at 0-0.1%.
  • This aligns with the BoJ's consistent messaging since the March rate hike, which emphasised a data-dependent, "wait and see" approach. A consecutive rate hike at this juncture would likely convey a conflicting signal.
  • Looking ahead, we anticipate the BoJ to follow a modest, gradual hiking trajectory. A growing number of economists foresee the possibility of another rate hike in October, with July also emerging as a potential earlier timeframe. Factors such as the prospect of a weaker yen are cited as potential accelerators for this timeline.
  • In the Outlook Report, the BoJ is expected to present inflation forecasts that consistently exceed 2% across all projection periods. However, the BoJ is likely to underscore the downside risks associated with a scenario where 2% inflation extends into FY26.
  • A potential downward adjustment to the growth outlook for FY2023 might serve as a rationale for implementing gradual policy tightening.
  • Full preview here:

    • BOJ Preview - Apr 2024.pdf





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EXECUTIVE SUMMARY

  • At this week’s meeting, we expect the BoJ to maintain its target range for the uncollateralized overnight call rate at 0-0.1%.
  • This aligns with the BoJ's consistent messaging since the March rate hike, which emphasised a data-dependent, "wait and see" approach. A consecutive rate hike at this juncture would likely convey a conflicting signal.
  • Looking ahead, we anticipate the BoJ to follow a modest, gradual hiking trajectory. A growing number of economists foresee the possibility of another rate hike in October, with July also emerging as a potential earlier timeframe. Factors such as the prospect of a weaker yen are cited as potential accelerators for this timeline.
  • In the Outlook Report, the BoJ is expected to present inflation forecasts that consistently exceed 2% across all projection periods. However, the BoJ is likely to underscore the downside risks associated with a scenario where 2% inflation extends into FY26.
  • A potential downward adjustment to the growth outlook for FY2023 might serve as a rationale for implementing gradual policy tightening.
  • Full preview here:

    • BOJ Preview - Apr 2024.pdf