Bank of Japan keeps negative interest rates - and its silence on the future

This morning, in one of the last major economic calendar events of the 2023 year, the Bank of Japan concluded its 2023 December policy meeting, and released its latest interest rates decision.

The BoJ decided to keep rates steady at -0.1 per cent. The country’s negative interest rate has been in place for some time – an anomaly in a very hawkish year where several countries have had rate hikes of more 100 basis points.

The BoJ is also leaving the target for its 10-year yield curve control (YCC) also intact at 0 percent. This decision was reportedly unanimous – signifying a strong stance against any immediate surprise rate hikes in the short term.

What was on everyone’s minds – communication as to when, if and how Japan would exit this negative interest rate cycle – remained absent. Guidance was left unchanged and, unlike the FOMC’s latest rates announcement, timelines and monetary policy plans for 2024 were noticeably absent.

FX: Effects of the rates decision for JPY

The Bank of Japan’s stance, and lack of communication on any exit plans for its negative interest rate, did little to help the JPY in its current losing streak. The USD has rebounded significantly against the Yen, rising significantly from 142.60 to 143.75 in just a few short hours.

Read more: USD/JPY technical analysis by Invezz analyst

Further clues from deputy BoJ governor

However, deputy governor of the Bank of Japan Ryozo Himino gave a speech entitled ‘Japan’s Economy and Monetary Policy’ on December 6^th which sheds some light onto the matter:

So, exiting the current phase by substantially raising interest rates in an ordered manner is certainly on the BoJ’s mind and – perhaps – even in its imminent 2024 plans.

Kazuo Ueda maintains mystery

Bank of Japan Governor Kazuo Ueda gave a press conference some hours after the rate decision announcement, at which analysts were hoping for further information shedding further light on the BoJ’s decision future plans for potentially exiting the negative interest rate. Ueda, however, remained cryptic and open-ended in his answers: