BOJ Holds Short Term Rates Steady and Signals Plans to Discuss Cutting JGB Purchases

Akira Ito
14 Jun, 2024
Tokyo

Stocks in Japan edged higher, the yen raced towards its 34-year low, and Japanese government bond yields remained steady after the Bank of Japan announced its monetary decisions. 

The Bank of Japan held its short-term policy rate range steady between zero and 0.1%, as widely anticipated, after lifting the rate for the first time in March and ending the negative rate regime since 2007. 

The central bank also said it plans to reduce the purchase of Japanese government bonds after the July meeting, but policymakers continue to stick to the plan to purchase 6 trillion yen worth of bonds a month. 

The move is a reflection of the plan announced by Governor Kazuo Ueda to let the market dictate long-term rates after controlling the yield curve for more than two decades. 

The central bank's move is likely to increase long-term rates in the future, but it may not arrest a downward slide in the yen. 

The interest rate gap between the U.S. and Japan is not likely to narrow in the near future.

On Wednesday, the U.S. Federal Reserve held its interest rate steady and indicated it anticipates only one rate cut in the year from the earlier projection of three rate cuts in March. signaling higher rates are likely to stay longer.

The Japanese yen declined to 158.02 and approached the 34-year low of 160 yen against the U.S. dollar on the persistent yield differential between the U.S. and Japanese bond yields. 

Currency traders are anticipating the Japanese yen to test new lows between 165 and 170 over the next six months of trading. 

The yield on a 10-year Japanese government bond held firm near 0.94%.

 

Japan Stock Movers 

The Nikkei 225 Stock Average rose 0.4% to 38,875.24, and the Topix index advanced 0.5% to 2,746.23.

In Friday's trading, technology, banking, and automobile makers were in focus. 

Tokyo Electron, Advantest, Screen Holdings, and Lasertec declined between 0.2% and 0.4%. 

Softbank jumped 3.5% to ¥10,110.0. 

Sumitomo Mitsui Financial decreased by 0.3% to ¥10,000.0, Mitsubishi UFJ declined by 1.6% to ¥1,580.0, and Mizhuo Financial Group eased by 0.1% to ¥3,063.0. 

Sumco declined 1.9% to ¥2,417.0, Panasonic Holdings rose 0.4% to ¥1,302.50, and Canon jumped 0.5% to ¥4,447.0. 

Ocean freight lines were among the actively traded stocks, and Kawasaki Kisen gained 4% to ¥2,321.50, Mitsui OSK Lines jumped 4.4% to ¥4,964.0, and Nippon Yusen K.K. advanced 3% to ¥4,777.0.