MNI BoJ Review - January 2024: Still On Track For An April Hike

Executive Summary

• The Bank of Japan (BoJ) retained the -0.1% short-term interest rate, alongside the soft 1.0% 'reference' target rate for the 10-year government bond yield. Forward guidance remained intact, with a commitment to "not hesitate to take additional easing measures if necessary."
• Notably, the central bank expressed increased confidence in achieving its 2% sustained inflation goal, although without specifying the expected timeline.
• In the Quarterly Outlook Report, the BoJ adjusted its forecast for core CPI excluding fresh food, revising it to 2.4% y/y from 2.8% for FY2024 but raising it to 1.8% from 1.7% for FY2025. A more hawkish development would have been if the FY2025 forecast was at or above 2%.
• In the press conference, Governor Ueda struck a balance between the dovish tone of the statement and a reference to policy normalisation. He highlighted the gradual rise in the BoJ's confidence, citing strong indications from firms about raising wages and the upward trend in service inflation.
• Overall, the recent developments did little to alter expectations that the BoJ is poised to increase policy rates by 10bps (to 0.00%) at the April 26th meeting.
• Full review here.