At the highly-anticipated July policy review meeting, the Bank of Japan (BoJ) board members decided to leave their current monetary policy settings unchanged, maintaining rates and 10yr JGB yield target at -10bps and 0.00% respectively.
Summary of the statement
BoJ maintains band around 10-year JGB yield target at up and down 0.5% each.
BoJ makes decision on ycc by 8-1 vote.
BoJ board member Nakamura dissents to decision on YCC.
BoJ board member Nakamura dissents to decision on YCC, considering it was desirable to allow greater flexibility after confirming rise in firms' earnings power from sources such as financial statements statistics.
BoJ board member Nakamura dissents to decision on YCC but in favour of idea of conducting YCC with greater flexibility.
Will guide yield curve control more flexibly.
Appropriate to heighten sustainability of monetary easing.
Will operate yield curve control more flexibly to respond nimbly to upside, downside risks.
Will keep offering fixed-rate operations for 10-year JGB yield at 1.0%.
In order to encourage formation of yield curve that is consistent guideline, boj will continue with large-scale jgb buying and make nimble responses for each maturity.
For exmaple, by increasing amount of JGB buying and conducting fixed-rate purchase ops and funds-supplying ops against pooled collateral.
BoJ widens range of 5-10 year bond buying, offering to buy as much as JPY900 bln each time, up from JPY875 bln.
Market reaction
USD/JPY’s renewed upside gained extra traction on the BoJ’s policy announcements. The pair is currently trading at 140.06, up 0.45% on the day, having tested 141.08 in a knee-jerk reaction to the BoJ decision.
USD/JPY: 15-minutes chart
Interest rates FAQs
What are interest rates?
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%.
If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
How do interest rates impact currencies?
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
How do interest rates influence the price of Gold?
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank.
If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
What is the Fed Funds rate?
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure.
Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD posts modest gains above 0.6450 despite stronger US Dollar, eyes on RBA Meeting Minutes
The AUD/USD pair trades on a stronger note around 0.6460 during the early Asian session on Monday. However, the upside for the pair might be limited amid the cautious remarks from the Federal Reserve (Fed) officials and strong US economic data, which boost the US Dollar (USD) broadly.
Japanese Yen holds gains as US Dollar loses ground ahead of Retail Sales
The Japanese Yen appreciates as the US Dollar corrects downwards ahead of Retail Sales data. Japan’s GDP annualized growth for Q3 was 0.9%, slowing down from the 2.2% growth recorded in Q2. Japan’s Kato stated that he would take appropriate action to address excessive fluctuations in foreign exchange rates.
Gold marks sixth-day of losses on Powell’s slightly hawkish rhetoric
Gold prices extended their losses for the sixth straight day, set to achieve weekly losses of over 4%, the largest since September 2023. Federal Reserve Chair Jerome Powell's slight “hawkish” rhetoric lifted the Greenback, denting appetite for the golden metal. At the time of writing, XAU/USD trades at $2,564, down by 0.17%.
Could a Solana ETF debut in 2025? Expert weighs in
Solana (SOL) made the rounds across crypto communities on Friday as key executives from VanEck and BlackRock gave contrasting views on the possibility of a SOL exchange-traded fund (ETF) launching in the US.
Week ahead: Preliminary November PMIs to catch the market’s attention
With the dust from the US elections slowly settling down, the week is about to reach its end and we have a look at what next week’s calendar has in store for the markets. On the monetary front, a number of policymakers from various central banks are scheduled to speak.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.