Commentary Directory

Bank of Japan Announcement: September 2023

Jacob Hess
September 21, 2023

Bank of Japan Announcement

9/21/2023 (September 2023)

-0.1% (0 bps)


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The Bank of Japan held its policy rate unchanged in the most recent September meeting after it made a slight change to its yield curve control policy in the previous meeting. The maintenance of ultra-loose policy is justified by the Bank of Japan’s insistence that “Japan's economy is projected to continue growing at a pace above its potential growth rate” while at the same time projecting that “the year-on-year rate of increase in the CPI (all items less fresh food) is likely to decelerate.”

Based on the current trend in growth and inflation, it seems likely that we will see the Bank of Japan hike within the next year, possibly by the end of 2023. The BoJ’s current expected path of inflation feels too optimistic, and inflation prints continue to top previous forecasts. There will have to be major shifts in wage and employment data to support the Bank of Japan’s inflation narrative as both point to a labor market supporting Japanese purchasing power. For now, the BoJ stands apart from the rest of the developed world with its insistence in keeping ultra-loose policy.