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MNI BoJ Review – June 2024: JGB Purchase Announcement More Dovish Than Expected, May Delay Rate Hike

The BoJ kept its benchmark interest rate unchanged, but announced plans to reduce its bond purchases, with details to be specified at the next policy meeting.

Central Bank ReviewBoJ - ReviewBond Market NewsCentral Bank ReportsMarketsBank of Japan (BOJ) Market News

EXECUTIVE SUMMARY

  • At its Monetary Policy Meeting (MPM) on June 13-14, the Bank of Japan (BoJ) kept its benchmark interest rate unchanged, maintaining it between 0 to 0.1% in a unanimous vote, a move widely expected by the market.
  • The BoJ also announced plans, in an 8-1 vote, to reduce its bond purchases, with details to be specified at the next policy meeting.
  • The announcement on future JGB purchases was seen as more dovish than expected, lacking clarity on the size and pace of reductions. The BoJ’s intent to consult market participants in "Bond Market Group" meetings indicates a cautious approach to policy normalisation.
  • Governor Ueda emphasised that the reductions would be "substantial," aiming to counter perceptions of caution in delaying the cuts until July.
  • However, he also noted the need to balance the impact of the upcoming Quantitative Tightening (QT) decision on the economy and market, suggesting the BoJ may avoid simultaneous rate hikes and "substantial" QT to prevent market shocks. This raises the risk of delaying rate hikes until September unless yen weakness intensifies pressure on the BoJ.
  • Click for full review:

    • BOJ Review - Jun 2024.pdf


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EXECUTIVE SUMMARY

  • At its Monetary Policy Meeting (MPM) on June 13-14, the Bank of Japan (BoJ) kept its benchmark interest rate unchanged, maintaining it between 0 to 0.1% in a unanimous vote, a move widely expected by the market.
  • The BoJ also announced plans, in an 8-1 vote, to reduce its bond purchases, with details to be specified at the next policy meeting.
  • The announcement on future JGB purchases was seen as more dovish than expected, lacking clarity on the size and pace of reductions. The BoJ’s intent to consult market participants in "Bond Market Group" meetings indicates a cautious approach to policy normalisation.
  • Governor Ueda emphasised that the reductions would be "substantial," aiming to counter perceptions of caution in delaying the cuts until July.
  • However, he also noted the need to balance the impact of the upcoming Quantitative Tightening (QT) decision on the economy and market, suggesting the BoJ may avoid simultaneous rate hikes and "substantial" QT to prevent market shocks. This raises the risk of delaying rate hikes until September unless yen weakness intensifies pressure on the BoJ.
  • Click for full review:

    • BOJ Review - Jun 2024.pdf