Shinichi Uchida, deputy governor of the Bank of Japan (BoJ), stated on Friday that the Japanese economy is showing some signs of a moderate recovery. If the economic prognosis is met, Uchida continued, the central bank will continue to raise the rate.
Key quotes
The economy of Japan is making a modest recovery.
According to the Tankan survey, certain manufacturers’ business sentiment has improved. that as the prospect for US tariffs becomes less murky. The economy will accelerate after tariffs are moderated.
Overall, business mood appears to be strong.
The underlying inflation rate is probably going to stall for a while before progressively picking up speed again.
There is still a lot of uncertainty surrounding global economic trends.
to keep rising interest rates if the economy and prices move as we predict.
Market reaction
The USD/JPY pair is currently trading at 149.95, down 0.33% for the day.
Bank of Japan FAQs
What is the Bank of Japan?
The Japanese central bank, the Bank of Japan (BoJ), is in charge of establishing the nation’s monetary policy. Its mission is to maintain price stability by issuing banknotes and implementing monetary and currency regulation, which entails a 2% inflation objective.
What has been the Bank of Japan’s policy?
In 2013, the Bank of Japan implemented an ultra-loose monetary policy to boost inflation and the economy in a low-inflationary climate. Quantitative and Qualitative Easing (QQE), or printing notes to purchase assets like corporate or government bonds to generate liquidity, is the foundation of the bank’s policy. By first implementing negative interest rates and then actively regulating the yield of its 10-year government bonds, the bank significantly relaxed policy and doubled down on its strategy in 2016. The BoJ essentially retreated from its ultra-loose monetary policy position in March 2024 when it raised interest rates.
How do Bank of Japan’s decisions influence the Japanese Yen?
The Yen lost value in relation to its primary currency peers as a result of the Bank’s substantial stimulus. A growing policy gap between the Bank of Japan and other major central banks, which chose to drastically raise interest rates in order to combat decades-high inflation, made this process worse in 2022 and 2023. Because of the BoJ’s policies, the Yen’s value declined as the gap with other currencies widened. When the BoJ made the decision to resign its ultra-loose policy stance in 2024, this tendency somewhat reversed.
Why did the Bank of Japan decide to start unwinding its ultra-loose policy?
Japanese inflation surpassed the BoJ’s 2% objective due to a weaker yen and a surge in global energy prices. The action was also influenced by the possibility of salary increases in the nation, which is a major factor driving inflation.