The latest news from the Bank of Japan suggests that it would not immediately follow the lead of the Federal Reserve Bank and instead will hold with the current ultra-loose monetary policy. The BOJ Governor said recently that even an increase in inflation toward 1% would not be grounds for a rate hike. The BOJ also said that it would keep long-term interest rates capped at near zero. Like his counterparts, Governor Haruhiko Kuroda will be heading to the G20 meeting in Germany where the discussion is likely to be centered around the protectionist stance now projected by the US President. Kuroda will continue to push for free trade, sentiment echoed by European policymakers.
As reported at 9:42 am (GMT) in London, the USD/JPY was trading at 113.41 Yen, down 0.05%; the pair earlier hit a low of 112.91 Yen, while the session peak was set at 113.54 Yen. The EUR/JPY was 0.24% lower and trading at 121.5400 Yen.
Kuroda Says Future is Key
The Bank of Japan’s inflation target is set at 2%, and Kuroda insists that the country was still in need of current levels of monetary support, especially given that the inflation target is still far in the distance and because growth risks remain. Even an expected rise in consumer inflation later in the year, largely due to higher fuel prices and a hike in import prices, won’t automatically result in a corresponding interest rate hike. Kuroda said data won’t necessarily drive policy but rather a combination of factors, including the long-term inflation outlook and Japan’s economic health, will be the determinants.