Bank of Japan meetings produce high expectations of no changes

March 19, 2007
By Ken Worsley

Compared to last month’s keenly watched BOJ monthly policy meeting, there isn’t nearly as much interest going around this time in the news media. Most sources seem to expect rates to remain unchanged, for there to be a slight fall in the yen’s value in reaction to such an announcement, and for bonds to rise a tad. Actually, Bloomberg pointed out some interesting market activity today:

The Japanese currency declined against all 16 of the world’s most-actively traded currencies as a rally in Asian stocks prompted investors to resume carry trades.

As many have said, the interest rate hike from 0.25% to 0.50% in February shouldn’t have too much of an impact on the so-called ‘carry trade.’

According to Forbes, analysts from both Deutsche Bank and Barclays expect there to be no change, with Masuhisa Kobayashi of Barclays hinting at the role of politics in connection with any upcoming rate hikes:

We expect a unanimous decision to leave rates unchanged…It will be difficult for the bank to raise rates before the July 22 upper house election. But we believe it would be a mistake to rule out the possibility of a hike in June or July.

As it would be a mistake to rule out the possibility of domestic political pressure being put on the bank early this summer, and the consequential uproar from the foreign media, as we saw in January.

Filed Under Bank of Japan, Interest Rates