The Bank of Japan decided to keep its target for the uncollateralized overnight call rate at 0.25% and its deposit facility rate also at 0.25%. The uncollateralized call rate is similar to the Federal Reserve’s federal funds rate while the deposit facility rate resembles the Fed’s interest on reserve balances rate. Japan’s consumer price index has been, according to the BOJ, in the range of 2.0-2.5%. Japan has seen moderate increases in prices for services reflecting more so wage increases and less due to rises in import prices.
High uncertainty regarding Japan’s economic activity, developments in commodity prices, and firm price and wage behavior makes it necessary to pay attention to financial and foreign exchange markets. Given firm behavior in raising prices and wages, exchange rate developments are more likely to impact prices.
After the monetary policy statement release, the yen continued its fall against the dollar, with USD/JPY going from 154.58 to 155.29.
Alton Drew
18 December 2024
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