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Unchanged, Upside inflation Risks, But Growth Lower, Bond Purchases Maintained

BOJ
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The BoJ kept its interest rates unchanged at the April policy meeting, which was widely expected by the consensus. Focus largely rested on the forecast outlook, references to the weaker yen and planned bond purchases. The actual policy statement was very short, which noted the policy decision was unanimous.

  • It also stated that bond purchases would continue with the decisions made at the March 2024 policy meeting. That statement noted the current run rate of purchases was around ¥6trln per month and that the bank "will continue to announce the planned amount of JGB purchases with a range and will conduct the purchases while taking account of factors such as market developments and supply and demand conditions for JGBs." Hence no major changes on the surface there, although tapering of the bond buying program will remain a focus point.
  • On the forecast side, for inflation the 2024 FY core CPI forecast was kept at 1.9%, but with upside risks. 2025 was nudged up to 1.9% (from 1.8% prior). The first 2026 forecast was at 2.1%.
  • On growth the 2024 FY forecast was nudged down to 0.8% from 1.2% prior. 2025 was kept at 1.0%, while 2026 is also seen at 1.0%.
  • The BoJ expects easy financial conditions to continue for now, while noting FX shifts need to be monitored.
  • No major surprises from the BoJ has seen JPY weaken further, USD/JPY hitting fresh cycle highs above 156.00 post the meeting outcome. In the JGB futures space, we are higher, last at 144.00.
  • JGB futures continue to exhibit weakness, -20 compared to settlement levels, as the initial strengthening observed during early afternoon trading following the BoJ Policy Decision has moderated.
  • The cash curve bear-steepening has remained but has been pared. Yields 1-2bps higher versus 1-3bps higher at the lunch break. The benchmark 10-year yield is 1.5bps higher at 0.914% versus the fresh YTD yield high of 0933%, set this morning.
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The BoJ kept its interest rates unchanged at the April policy meeting, which was widely expected by the consensus. Focus largely rested on the forecast outlook, references to the weaker yen and planned bond purchases. The actual policy statement was very short, which noted the policy decision was unanimous.

  • It also stated that bond purchases would continue with the decisions made at the March 2024 policy meeting. That statement noted the current run rate of purchases was around ¥6trln per month and that the bank "will continue to announce the planned amount of JGB purchases with a range and will conduct the purchases while taking account of factors such as market developments and supply and demand conditions for JGBs." Hence no major changes on the surface there, although tapering of the bond buying program will remain a focus point.
  • On the forecast side, for inflation the 2024 FY core CPI forecast was kept at 1.9%, but with upside risks. 2025 was nudged up to 1.9% (from 1.8% prior). The first 2026 forecast was at 2.1%.
  • On growth the 2024 FY forecast was nudged down to 0.8% from 1.2% prior. 2025 was kept at 1.0%, while 2026 is also seen at 1.0%.
  • The BoJ expects easy financial conditions to continue for now, while noting FX shifts need to be monitored.
  • No major surprises from the BoJ has seen JPY weaken further, USD/JPY hitting fresh cycle highs above 156.00 post the meeting outcome. In the JGB futures space, we are higher, last at 144.00.
  • JGB futures continue to exhibit weakness, -20 compared to settlement levels, as the initial strengthening observed during early afternoon trading following the BoJ Policy Decision has moderated.
  • The cash curve bear-steepening has remained but has been pared. Yields 1-2bps higher versus 1-3bps higher at the lunch break. The benchmark 10-year yield is 1.5bps higher at 0.914% versus the fresh YTD yield high of 0933%, set this morning.