Japan's Ministry of Finance plans to raise its assumed long-term interest rate to 1.5% for the fiscal year 2024/25, up from the current record-low of 1.1%, indicating a potential strain on the country's budget as it is set to exceed 114 trillion yen ($782.64 billion).
The US dollar remains strong against major peers and the yen, as Treasury yields rise amid expectations of high US interest rates for a longer period, while China's central bank sets a stronger-than-expected daily midpoint for the yuan to counter mounting pressure on the currency.
Japan is unlikely to intervene in the market unless the yen weakens past 150 to the dollar and becomes a major political issue, according to a former central bank official, who also noted that the benefits of a weak yen are becoming clearer due to the re-opening of Japan's borders.
Japanese and Chinese central banks have significantly reduced their holdings of US Treasury bonds, making it less likely that their interventions in the foreign exchange market would disrupt global markets or strike fear into bond investors.
The combined footprint of Japan and China in the US Treasury market is at its lowest on record, leading to speculation that they may sell dollars and liquidate US Treasuries to support their currencies without causing significant market disruption.
Bank of Japan Governor Kazuo Ueda stated that underlying inflation in Japan remains below the bank's 2% target, leading to the decision to maintain the current approach to monetary policy, despite core consumer inflation staying above the target for the 16th consecutive month.
Chinese state-owned banks are expected to lower interest rates on existing mortgages, with the quantum of the cut varying for different clients and cities, in an effort to revive the property sector and boost the country's economy.
The Bank of Japan surprised financial markets by announcing "greater flexibility" in its monetary policy, specifically loosening its yield curve control, which has led to speculation about a potential tightening of monetary policy and the end of the policy measure.
Japan's inflation is "clearly in sight" of the central bank's target, according to board member Naoki Tamura, suggesting the possibility of ending negative interest rates early next year.
The Bank of Israel is expected to maintain its interest rate at 4.75% due to decreasing inflation and indications of modest economic growth, despite concerns about the slowdown in the hi-tech industry and reduced demand for workers; meanwhile, interest rates in Israel are influenced by expectations of lower rates in the United States and the recent drop in the shekel's value.
Former Bank of Japan board member Goushi Kataoka believes that the central bank can only shift away from its easy monetary policy once it has achieved its 2% inflation target sustainably, with wage negotiations in 2024 playing a key role in this process. Kataoka expects the Bank of Japan to gradually remove its yield curve control and negative interest rate policies before exiting its easy policy. He also emphasizes the importance of cooperation between the Japanese government and central bank in achieving the inflation target.
The yen strengthened and government bonds slumped as traders reacted to potentially hawkish comments from Bank of Japan Governor Kazuo Ueda on the negative interest rate policy, causing Japanese bank shares to jump and the benchmark bond yield to rise.
The Bank of Japan has signaled a possible early end to its easy money stance, with the central bank considering interest rate hikes and an early end to its bond-buying policy, which caught markets off guard and caused the yen to surge and Japanese government bond yields to reach a 9-year high.
Bank of Japan policymakers are discussing the need to shift away from the massive monetary stimulus of the past decade, suggesting a potential policy change in response to growing price pressures and changes in Japan's deflation-prone economy.
The Wall Street Journal reports a notable shift in the stance of Federal Reserve officials regarding interest rates, with some officials now seeing risks as more balanced due to easing inflation and a less overheated labor market, which could impact the timing of future rate hikes. In other news, consumer credit growth slows in July, China and Japan reduce holdings of U.S. Treasury securities to record lows, and Russia's annual inflation rate reached 5.2% in August 2023.
The Japanese yen strengthens against the US dollar as Bank of Japan Governor Kazuo Ueda hints at a potential shift away from negative interest rates.
Japanese long-term interest rates and the yen rose after Bank of Japan Governor Kazuo Ueda hinted at the possibility of ending the bank's negative interest rate policy.
The Bank of Japan's potential shift away from negative interest rate policy has ignited the Japanese Government Bond and currency markets, with the yen seeing its biggest rise in two months and the 10-year JGB yield reaching its highest point in almost a decade.
Japan's ruling party lawmaker Hiroshige Seko supports maintaining an ultra-loose monetary policy, following comments by the Bank of Japan governor that caused the yen and bond yields to rise.
Speculation is growing that the Bank of Japan may be moving away from ultra-loose policy and negative interest rates, with its policy meeting being the highlight of the week in Asian markets.
The Bank of Japan (BOJ) may become the most significant uncertainty factor in global markets as it potentially unwinds its negative interest rate policy and yield curve control, which could have knock-on effects on risk assets, including cryptocurrencies.
Central banks, including the US Federal Reserve, European Central Bank, and Bank of England, have pledged to maintain higher interest rates for an extended period to combat inflation and achieve global economic stability, despite concerns about the strength of the Chinese economy and geopolitical tensions.
The Japanese yen remains weak against the U.S. dollar due to high U.S. Treasury yields and anticipation of the Bank of Japan maintaining its current monetary policies, while the dollar is boosted by the prospect of higher U.S. interest rates.
The Bank of Japan has decided to maintain its ultra-loose policy and keep interest rates unchanged due to uncertainties in domestic and global economic growth.
Asia-Pacific markets fell as the Bank of Japan kept rates unchanged and noted a "moderate recovery" in the economy, while Japan's private sector activity expanded at its slowest pace since February and the country's August inflation rate remained above the BOJ's target for the 17th straight month.
The Japanese yen weakened and stocks and bonds remained under pressure as investors prepared for U.S. interest rates to remain high, despite the Bank of Japan sticking to ultra-easy monetary policy and making no changes to its outlook.
Banks are offering historically low interest rates on savings accounts, but savers can still find higher rates of 4% or even 5% through online high-yield savings accounts, money market accounts, and certificates of deposit.
Bank of Japan Governor Kazuo Ueda highlighted uncertainty over companies raising prices and wages, emphasizing the bank's commitment to maintaining loose monetary policy, while also expressing caution about the global economic outlook due to aggressive US interest rate hikes and sluggish growth in China's economy; the key driver of inflation will be whether strong wage growth and consumption outweigh rising import costs, he said.
The Bank of Japan policymakers are divided on how soon the central bank could end negative interest rates, with some members believing it may take a significant amount of time before revising the policy, while others believe the 2% inflation target has come within reach and could be assessed in early 2024. The central bank's commitment to ultra-loose monetary settings remains due to uncertainty regarding the achievement of its inflation target.
Investors are becoming increasingly concerned about sustained high interest rates, with the bond and foreign-exchange markets already showing signs of adjusting, and if stock markets do not follow suit, the coming months could be particularly challenging.
Investors are concerned about possible intervention as the yen approaches 150 per dollar, but the Bank of Japan may find it difficult to justify and achieve currency support due to the hesitation in exiting an ultra-easy monetary policy and the commitment to market-determined exchange rates.
Speculation that the Bank of Japan may abandon its negative rate policy raises concerns for Japanese homebuyers who rely on floating-interest mortgages.
The Bank of Japan is considering the eventual end of its ultra-loose monetary policy, with some policymakers discussing the conditions and timing of a future exit, according to a summary of opinions from their September meeting, leading to a rise in government bond yields.
The Bank of Japan is increasing its bond purchases in an effort to defend its yield curve control policy as government bond yields rise.
The recent surge in global bond yields, driven by rising term premiums and expectations of higher interest rates, signals the potential end of the era of low interest rates and poses risks for heavily indebted countries like Italy, as well as Japan and other economies tied to rock-bottom interest rates.
Concerns surround the upcoming release of U.S. payrolls data and how hawkish the Federal Reserve needs to be, as global markets experience a period of calm following a tumultuous week that saw Treasury yields rise to 16-year highs, crude oil prices drop, equities decline, and the yen strengthen. Japanese government bond yields are also causing concern, as investor sentiment towards the Bank of Japan's stimulus remains low.
Japan's central bank is under pressure to reconsider its ultraloose monetary policy due to factors such as a weak yen, post-pandemic inflation, and the Russia-Ukraine war.
US banks face the challenge of an extended period of high interest rates, which will pressure their profitability by increasing deposit costs, deepening bond losses, and making it harder for borrowers to repay loans.
World Bank President Ajay Banga predicts that interest rates will remain high for a longer period, impacting investments globally and creating challenges for central banks dealing with ongoing wars and trade flow disruptions.
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