Investing.com-- The Bank of Japan is expected to keep interest rates unchanged at the conclusion of a two-day meeting on Friday, although policymakers could still present a hawkish outlook on expectations of higher inflation.
According to a Multibagger poll, the BOJ is expected to keep its rates unchanged on Friday.
After hiking interest rates by 15 basis points in late-July and striking an unexpectedly hawkish tone, the BOJ caused a sharp sell-off in stock markets, especially with strength in the yen causing an unwinding in the carry trade.
The BOJ’s hike came after ending its ultra-dovish, negative rate regime in March this year. Policymakers have indicated that they expect inflation to continue rising, driven largely by improving wage growth across Japan.
Governor Kazuo Ueda has expressed openness to raising interest rates further, emphasizing uncertainty around how high rates could potentially rise.
ANZ analysts predict a gradual tightening cycle with the policy rate reaching 1% by late-2025, but expect no changes at this week’s BOJ policy meeting.
Japanese stocks are expected to show limited reaction if the BOJ keeps rates unchanged, but any hawkish signals could trigger renewed weakness in the market.
The Japanese yen has strengthened since the BOJ’s end-July meeting, with the USDJPY pair sliding to its lowest level in over nine months. The yen is expected to show little reaction if rates remain unchanged, but any hawkish signals could lead to further strength in the currency.
Analysis:
The Bank of Japan's decision to keep interest rates unchanged could have significant implications for both the Japanese stock market and the value of the yen. Investors will be closely watching for any hints of a potential tightening cycle, which could impact market sentiment and currency exchange rates. It is important for investors to stay informed about central bank policies and their potential impact on financial markets in order to make well-informed investment decisions.