- In March 2024, the Bank of Japan increased the interest rate to 0.1% for the first time in several years.
- Octa analyst believes that this time, the interest rate will remain unchanged, as it happened during the most recent meeting on 14 June 2024.
- However, the Bank of Japan is expected to provide details on how it is going to reduce bond buying.
The Bank of Japan is likely to preserve the same interest rate on 31 July 2024. However, the market expects some action on stimulus policies and the details of the reduction in bond purchases.
The Bank of Japan (BOJ) will announce its decision on the interest rate at the upcoming meeting on 31 July 2024. The rate is expected to remain the same, supporting the decision made at the meeting in March 2024.
In March, the BOJ raised the interest rate from −0.1% to 0.1%, the first increase in several years. This time, the rate is likely to remain the same—at 0.1%. While many expect the BOJ to increase the interest rate, they are likely to do so later this year. The decision heavily depends on whether consumption will recover and if the inflation keeps around the bank's 2% target. For now, the inflation exceeds the BOJ's target, with June's core inflation hitting 2.6%. In May, it was also higher than the target—at 2.5%.
‘The BOJ aims to increase the interest rate this year, but it's unlikely to occur during the upcoming meeting. Yet, they are expected to announce how they plan to cut the bond buying. They may even reduce it a bit more than expected to avoid fueling JPY weakness’, said Kar Yong Ang, a financial market analyst at Octa.
He added that investors expected a hawkish decision as short-yen carry trades were unwound ahead of the meeting. This resulted in USD falling to its lowest in around two months against JPY on Thursday.
In March, the BOJ ended bond yield control, which emphasizes a shift away from a radical stimulus program. However, it didn't reverse the JPY's downward trend. During the previous meeting in June, the BOJ didn't provide enough details on cutting the bond purchases, and JPY also weakened. This time, a detailed decision on tapering bond buying is expected. Currently, the BOJ buys about 6 trillion yen worth of bonds monthly. Some believe that they will roughly halve bond purchases in the coming years.
If the BOJ maintains the current interest rate, it may prompt selling activity. However, announcing detailed plans to significantly cut bond purchases may strengthen the yen. Technical analysis suggests the USD/JPY pair is likely to decline further toward support levels in the 152–149 zone, supported by RSI divergence.
***
Octa is an international broker that has been providing online trading services worldwide since 2011. It offers commission-free access to financial markets and various services already utilised by clients from 180 countries with more than 42 million trading accounts. They provide free educational webinars, articles, and analytical tools to help clients reach their investment goals.
The company is involved in a comprehensive network of charitable and humanitarian initiatives, including the improvement of educational infrastructure and short-notice relief projects supporting local communities.
Octa has also won over 70 awards since its foundation, including the 'Best Educational Broker 2023' award from Global Forex Awards and the 'Best Global Broker Asia 2022' award from International Business Magazine.