Japan’s alternative way: the Central Bank does not raise rates

Tokyo goes against the tide of the Fed and the ECB and remains stable on rates. The Bank of Japan kept the benchmark short-term interest rate at -0.1% and the 10-year government bond yield around 0% during its September meeting, as widely expected. The decision came just hours after the US raised interest rates by 75bps, the third in a row, and signaled further hikes. Policy makers reminded that the Japanese economy is expected to come under downward pressure from high commodity prices due to the protracted war in Ukraine. However, the economy is likely to recover as the impact of COVID and supply chain problems has subsided. On the price front, the change y / y in consumer price inflation was between 2.5 and 3%, due to the increase in the prices of energy, food and durable goods. The highest in eight years, but laughable when compared with US and European values:

The central bank said it will continue to buy unlimited amounts of bonds to defend an implied ceiling of 0.25% each market day, as it has been doing since April. The Board also decided to phase out the pandemic relief loan program and expand liquidity operations targeting a wider range of corporate financing needs.

The Yen hit a low against the Dollar, breaking above 145 per USD. this may be related to Tokyo's monetary policy

In reality today the Euro touched a further low against the dollar, all despite the fact that the ECB has already announced a restrictive monetary policy. In my opinion, in these cases, the trade deficit weighs much more than monetary policy. Both the Euro zone and Japan have recorded record trade deficits, especially linked to high energy costs, and this problem is not solved with rates.

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The article The alternative way of Japan: the Central Bank does not raise rates comes from ScenariEconomici.it .

This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/la-via-alternativa-del-giappone-la-banca-centrale-non-rialza-i-tassi/ on Thu, 22 Sep 2022 08:24:47 +0000.