Source: Wall Street See
The Central Bank of Japan stated that it is expected that the potential CPI inflation expectations will gradually rise, with price risks for fiscal year 2025 biased towards an upward direction. The economy may continue to grow at a pace higher than the potential growth rate. If the above economic and inflation outlooks are realized, there will be corresponding continued rate hikes and adjustments to the degree of monetary easing.
In October, the Bank of Japan continued to 'stand pat', overall economic and inflation expectations tended to rise, and did not rule out the possibility of further rate hikes.
On the morning of Thursday, October 31st, the Bank of Japan announced that it would maintain the benchmark interest rate at 0.25%.
Due to the market having almost fully priced in the Bank of Japan's decision to 'stand pat' this time, focus is now on how the inflation forecast for the fiscal year 2024 is revised, as well as the Governor Kuroda's afternoon speech on interest rate hikes and related factors.
For the fiscal year 2025, price risks tend to rise, with the economy continuing to have high growth potential.
The Bank of Japan stated in its report that by the end of the fiscal year 2024, the year-on-year growth rate of the CPI is expected to reach around 2.5%. By the fiscal years 2025-2026, it will decrease to 2%. It is expected that medium to long-term inflation expectations will increase with the strengthening of the 'wage-price' benign cycle, and the potential CPI inflation expectations will gradually rise.
In terms of outlook for economic activity, the Bank of Japan stated that it roughly maintains its expectations for actual GDP growth rates. It is expected that the Japanese economy may continue to grow at a pace above the potential growth rate, with continued moderate growth in overseas economies, and a gradual strengthening of the benign cycle from income to expenditure under loose financial conditions.
The report also indicates that there is still a high level of uncertainty in Japan's economic activities and prices, including the development of overseas economic and price, commodity prices, and the wage and price setting behavior of domestic companies. In this situation, it is necessary to pay appropriate attention to the development of the financial market and forex market and their impact on Japan's economic activities and prices.
If the economic outlook becomes a reality, there will be a rate hike.
The Bank of Japan stated that the future monetary policy will depend on the future economic activities and prices, as well as the development of financial conditions. However, considering the current real interest rates are significantly low, if the above economic outlook becomes a reality, banks will continue to raise interest rates accordingly and adjust the degree of monetary easing.
The report states that, based on this, banks need to pay appropriate attention to the future trends of the global economy, especially the USA economy, as well as the development of financial markets and capital markets.
"The U.S. Securities and Exchange Commission (SEC) and other regulatory agencies are concerned about this incident and may conduct a deeper examination of NYSE's operations and crisis management mechanisms. Market analysts expect that such technical failures may prompt regulatory agencies to strengthen their supervision and requirements for exchange technology infrastructure."
After the Bank of Japan's interest rate decision was announced, the overall market volatility was not significant. The USD/JPY rose more than 30 points in the short term, then retreated slightly; currently down about 0.2%, at 153.137. Japan 10-year treasury notes yield rose slightly by 2 basis points, at 0.944%.
Japanese stocks continue to fluctuate narrowly, with a decline of 0.41% by the end of the morning session.
Editor / jayden