The Bank of Japan (BoJ) left its policy settings unchanged as expected but BoJ Governor Kazuo Ueda signaled there may be potential for further monetary policy normalisation. The stance shows that the BoJ is increasingly confident in achieving sustainable inflation supported by stronger consumption trends, as reported by Kenanga.
Last week, the central bank maintained the short-term interest rate (overnight call rate) at 0.25% by a unanimous vote.
Japan economy continues to recover at a moderate pace. Growth is expected to surpass potential levels, backed by stronger consumption and income growth, with inflation gradually aligning with the BoJ’s price stability target. Importantly, exchange rate fluctuations are becoming increasingly significant, as firms adjust wages and prices, making currency movements critical for future policy decisions.
