BOJ surprises by removing advance guidance – UOB Group

The Bank of Japan is keeping monetary policy unchanged but removing its forward bias, much to the complete surprise of markets, notes UOB Group senior economist Alvin Liew.

No change in monetary policy guidance as expected

“The Bank of Japan (BOJ) at its monetary policy meeting (MPM) scheduled for Friday (September 20), made a unanimous decision to maintain its current monetary policy guidance for money market operations, in line with market expectations. “

“The surprise in the September MPM statement was the absence of any forward-looking monetary policy guidance, unlike the July MPM. The BOJ’s upbeat economic outlook and expectations of a gradual pick-up in inflation in September’s MPM were largely unchanged from July.”

“We expect the BOJ to resume normalization in Q4 24 (likely October MPM) with a 25bps hike to 0.50%, which we believe will be the terminal rate. This path will also be subject to future changes to CPI forecasts in subsequent MPMs.”