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Editor in Chief Mohamed Wadie

Bank of Japan keeps Negative Interest Rates on Hold, Pushes Yen to Plunge


Tue 23 Jan 2024 | 08:19 PM
Taarek Refaat

The Bank of Japan kept monetary policy unchanged while adjusting its economic forecasts; staying on negative interest rates, which led to a decline in the yen price.

The Bank of Japan kept the short-term interest rate at -0.1%, and continued to control the yield curve after the end of its two-day meeting, according to a statement published on Tuesday.

On the other hand, during its quarterly forecast report, the bank reduced its inflation estimates for the fiscal year that begins in April to 2.4% instead of 2.8% previously, meaning that consumer price increases will continue to exceed the 2% target set by the central bank for a longer period, after exceeding this level since April 2022.

The decision was unanimously expected by Bank of Japan watchers polled by Bloomberg, as the major New Year's Day earthquake and a worsening financing scandal that has engulfed Prime Minister Fumio Kishida's ruling party make this an inappropriate timing for the first interest rate hike in Japan since 2007.

By maintaining the current monetary policy, the Bank of Japan will remain the only one in the world that is still applying negative interest rates, while the Federal Reserve and the European Central Bank have indicated their desire to reduce interest rates later this year.

The yen fell against the dollar immediately after the announcement, briefly reaching 148.55 yen to the dollar, before recovering all its losses and reaching 147.86. The yield on 10-year government debt also decreased to 0.635%.

Economists still expect that the Bank of Japan will raise interest rates later this year.