Unchanged & No Hints Of Early 2024 Policy Shift

The BoJ December meeting delivered few surprises. The policy rate was left at -0.1%, while the 10yr JGB yield target at around 0%. The upper bound reference on 10yr JGB yields was also kept at 1%.

• The central bank will also continue with 'patient easing', while it won't hesitate to ease further if necessary. Hence no change to the BoJ's forward guidance.
• Today's policy decision/outcome was also unanimous (9-0 board vote).
• The economy was described as continuing to recover moderately, which was expected to continue. Pent up demand, coupled with improving consumption and business investment trends were cited.
• Inflation expectations are also rising, but again the description was moderately. Inflation is likely be above 2% in fiscal year 2024, before slowing. Underlying inflation is expected to gradually rise towards the BoJ's 2% target.
• Uncertainty around the economic and inflation outlook remain very high. FX and other financial market moves need to be analyzed for their impact on price trends.
• We still have Governor Ueda's press conference later, but this policy announcement doesn't appear to be paving the way for a significant shift at the January policy meeting (23rd Jan next year).