Different from the approach by most other central banks, the Bank of Japan (BOJ) is seen to be implementing their monetary policy tightening measures with the focus being directed to the policy meeting in the Asian session just now.
The BOJ decided to raise its key short-term interest rate at its July 2024 meeting to 0.25% from the previous range of 0 to 0.1% set in March.
The central bank added that it would reduce monthly bond purchases to JPY 3 trillion in January to March 2026 from the current rate of around JPY 6 trillion to pursue a more normal monetary policy.
From August, the BoJ will offer to buy JPY 400 billion of 5- and 10-year JGB Japanese government bonds at each of its operations, eliminating the JPY 400-550 billion continuous offer range.
The changes are part of the central bank's plan to reduce its nearly $5 trillion balance sheet and slowly withdraw from the bond market.
In its quarterly outlook, the BoJ projected core inflation for the financial year 2024 (FY24) to fall to around 2.5%, less than the April forecast of 2.8%. It will be around 2% for FY25 and 26.
On the GDP side, policymakers cut their 2024 growth forecast to 0.6% from 0.8%, according to the statistical review. For FY 25 and 26, the bank maintains its GDP outlook at 1.0%.
Several follow-up speeches delivered by Governor Kazuo Ueda also stole the attention of investors.
Among them, he believes that the 0.25% interest rate is still too low but expressed the difficulty in determining the period of the next interest rate increase.
He also saw the 0.50% level as not a ceiling for interest rates, and the central bank is committed to achieving a stable inflation target.
