According to economists surveyed by Reuters, there's a strong expectation that the Bank of Japan will bid farewell to its negative interest rate strategy come April. This prediction is gaining momentum, with an increasing number of experts foreseeing this transition happening in the current month. Recent developments, including notable spikes in wages and notable discourse from policymakers, signal an inevitable shift in monetary policy.
Previously, the Central Bank has underscored the significance of wage growth as a pivotal factor in the move towards more regular conditions. The potential end of negative interest rates, in effect since 2016, would mark a significant milestone and the first rate increase since 2007.
During the Bank of Japan's most recent two-day meeting, 12 out of 34 economists suggested ending negative rates. This marks an uptick from the previous survey, reflecting evolving sentiments.
April remains the favored timeframe, as indicated by 21 out of 34 economists participating in the survey.
In April, the BOJ will have more information to make a relevant decision, including business confidence data and the Tankan report, alongside an analysis of the economic landscape at its branch managers meeting. Aside from that, publishing a quarterly forecast report in April will facilitate the communication of any policy adjustments.
A slew of lackluster economic indicators in the US, coupled with escalating speculation regarding a potential interest rate reduction by the Federal Reserve, could potentially dampen the stock market and bolster the yen. This scenario would pose challenges for the Bank of Japan, making it challenging to counteract such trends.
The majority of the 52 economists who provided forecasts for the Bank of Japan's deposit rate by the quarter's end anticipate rates to hover around -0.1% or 0.0% during the January-March period. Four experts foresee a modest growth to 0.1%, with 13 among them expecting this shift to materialize between April and June.
That being said, there are concerns voiced regarding the consequences of postponing this decision, particularly given the backdrop of a volatile global economy and speculations surrounding a potential interest rate reduction in the US.
Additionally, nearly all economists participating in the survey anticipate revisions to yield curve control policies. These adjustments are expected to unfold shortly and might entail the proposal of precise figures outlining the volume of government bonds slated for purchase by the Bank of Japan.
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