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MNI BoJ Preview - June 2024: Steady Policy Rate, Focus On JGB Purchases

At this week’s meeting, we anticipate that the BoJ will maintain its policy rate settings (keeping the target for the overnight uncollateralized call rate at 0-0.1%), in line with consensus.

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EXECUTIVE SUMMARY

  • At this week’s meeting, we anticipate that the BoJ will maintain its policy rate settings (keeping the target for the overnight uncollateralized call rate at 0-0.1%) on June 14, in line with consensus. Recent economic data around prices and growth suggest this approach.
  • Nevertheless, the trend towards normalisation continues. The BoJ's sensitivity to foreign exchange rates has also shifted in recent months. We expect a generally hawkish tone at the meeting, indicating the possibility of additional policy tightening in subsequent meetings, possibly as soon as July.
  • The focus for the June meeting will likely be on balance sheet policy and the future pace of JGB purchases.
  • It is uncertain whether the BoJ will revise its JGB purchase directive this week. However, it seems increasingly likely that the Policy Board will introduce new guidelines, as suggested by recent reports indicating a potential discussion on publishing a more specific schedule for reduced JGB purchases as early as the June meeting
  • The Reuters poll showed that 63% of economists predict the BoJ will decide to start reducing bond buying at the June meeting, up from 41% in May.
  • Regardless of the decision at this week’s meeting, we expect the BoJ to proceed cautiously and gradually in both hiking the policy rate and adjusting JGB purchases.
  • Full preview here:

    • BOJ Preview - Jun 2024.pdf





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EXECUTIVE SUMMARY

  • At this week’s meeting, we anticipate that the BoJ will maintain its policy rate settings (keeping the target for the overnight uncollateralized call rate at 0-0.1%) on June 14, in line with consensus. Recent economic data around prices and growth suggest this approach.
  • Nevertheless, the trend towards normalisation continues. The BoJ's sensitivity to foreign exchange rates has also shifted in recent months. We expect a generally hawkish tone at the meeting, indicating the possibility of additional policy tightening in subsequent meetings, possibly as soon as July.
  • The focus for the June meeting will likely be on balance sheet policy and the future pace of JGB purchases.
  • It is uncertain whether the BoJ will revise its JGB purchase directive this week. However, it seems increasingly likely that the Policy Board will introduce new guidelines, as suggested by recent reports indicating a potential discussion on publishing a more specific schedule for reduced JGB purchases as early as the June meeting
  • The Reuters poll showed that 63% of economists predict the BoJ will decide to start reducing bond buying at the June meeting, up from 41% in May.
  • Regardless of the decision at this week’s meeting, we expect the BoJ to proceed cautiously and gradually in both hiking the policy rate and adjusting JGB purchases.
  • Full preview here:

    • BOJ Preview - Jun 2024.pdf