The Bank of Japan maintains its monetary policy unchanged, but removes its forwards guidance, to the sheer surprise of the markets, UOB Group Senior Economist Alvin Liew notes.

No change to monetary policy guideline as expected

“The Bank of Japan (BOJ) at its scheduled Monetary Policy Meeting (MPM) on Fri (20 Sep), took a unanimous decision to maintain its current monetary policy guidelines for money market operations, in line with market expectations.”

“The surprise in Sep MPM statement was the absence of any monetary policy forward guidance, unlike the Jul MPM. BOJ’s positive economic outlook and expectations of gradually rising inflation in the Sep MPM was largely unchanged from Jul.”

“We expect BOJ to resume normalisation in 4Q 24 (likely the Oct MPM), with a 25-bps hike to 0.50% which we believe will be the terminal rate. This path will also be subject to further CPI forecasts changes in the subsequent MPMs.”