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Interest Rate Decision: 1. Interest Rate Decision: The Bank of Japan will maintain the policy rate at 1%, in line with expectations. 2. Voting Ratio: 8-1, with member Hajime Takada dissenting in favor of a 25 basis point rate hike. 3. Forward Guidance: The Bank of Japan will continue to raise interest rates based on economic and price developments and financial conditions. The impact of the Middle East situation on the timing and pace of rate hikes will be assessed. 4. Economic Outlook: GDP growth forecasts for fiscal years 2026 and 2027 have been revised upwards, with overall risks to the economic outlook balanced. 5. Inflation Outlook: Core CPI forecasts for fiscal year 2026 have been revised downwards, while those for fiscal year 2027 have been revised upwards. Underlying inflation is approaching 2%, and core inflation may exceed the 2% target. 6. AI Impact: The impact of global AI demand and future foreign exchange developments on the economy and prices must be closely monitored. Kazuo Uedas Press Conference: 1. Interest Rate Outlook: The Bank of Japan expects to continue raising interest rates. Policy will not be delayed until inflation is fully stable at 2%. The Bank will ensure it does not fall behind the current situation. 2. CPI Outlook: There are upside risks to potential CPI, which may exceed the 2% price stability target. CPI growth is expected to decline to around 2% in the latter half of the forecast period. 3. GDP Forecast: Real GDP growth is expected to be roughly in line with the April outlook report. 4. Other: Attention is focused on how higher memory chip prices may push up overall prices. Artificial intelligence spending itself has driven up prices.Note: The press conference of Bank of Japan Governor Kazuo Ueda has ended.Germanys seasonally adjusted unemployment figures and unemployment rate for July will be released in ten minutes.Bank of Japan Governor Kazuo Ueda: Committee members have differing views on the inflation outlook, and we hope to reach some conclusion on this starting with the next monetary policy meeting.Goldman Sachs lowered its price target for Apple (AAPL.O) to $360 from $370, but maintained its buy rating.

Prior to Japan's inflation data and BoJ Ueda's speech, EUR/JPY is anticipated to fall below 143.00

Daniel Rogers

Feb 23, 2023 15:00

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During the Asian trading session, the EUR/JPY is fluctuating around 143.00. The Japanese Yen bulls are attempting for the third time to drive the cross below the immediate support of 143.00, as investors anticipate that BoJ Governor nominee Kazuo Ueda will discuss an exit from the decade-long ultra-loose monetary policy managed by the Bank of Japan (BoJ).

 

The Japanese government has reiterated that the administration will pursue a change in the Bank of Japan's monetary policy under new leadership in order to increase the yen's competitiveness against other foreign exchange currencies. Therefore, BoJ Ueda's speech on Friday is expected to include additional yield-widening discussions.

 

Aside from this, Japan's National Consumer Price Index (CPI) (Jan) data will remain a focal point. The headline CPI is expected to rise to 4.5% from 4.0% in the previous release. And the core CPI, which excludes the cost of fuel and food, is anticipated to increase to 3.2% from 3.0% in the previous report. By increasing wages and consumer spending, the Japanese economy is gradually attaining a higher inflation rate.

 

According to Commerzbank economists, "patience is the name of the game." If Kuroda genuinely intended to pave the way for his successor by expanding the yield range, the BoJ's decision in early March, while Kuroda is still in charge, will be the first indication of how monetary policy will evolve. If not, we will have to wait until the end of April, when Ueda will conduct his first meeting. Even then, it is extremely unlikely that Ueda would immediately reverse monetary policy."

 

In the meantime, despite Christine Lagarde's hawkish remarks as president of the European Central Bank (ECB), the Euro is struggling to gain traction. According to ECB Lagarde, "headline inflation has begun to decelerate, but they intend to raise key rates by 50 basis points (bps) at the next policy meeting." In addition, she stated that the European Central Bank does not foresee a wage-price spiral in the Eurozone.

 

It is important to observe that the ECB has increased interest rates by 50 basis points over the past two monetary policy meetings, and a further 50 basis point increase will bring rates to 3.5%.

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