Bank of Japan interest rate decision: unchanged at 0% -0.10%. Removes key line on bond purchases

• Removes reference to statement that it currently purchases around 6 trillion yen worth of JGB per month
• In the March 18 decision, the BoJ raised rates for the first time in 17 years.
• The vote was 9-0
• Previous vote was 7-2
• Rates remain around 0-0.10%
• Risks to the economy are generally balanced
• Extremely high uncertainties weigh on Japan’s economic and price outlook
• The Japanese economy has recovered moderately despite some weakness
• The output gap is improving and expected to widen gradually)
• Medium and long-term inflation expectations have strengthened slightly
• Financial conditions have been accommodating
• More and more companies are starting to pass on wage increases in their selling prices
• Expect the positive cycle of rising wages and inflation to continue
• We must be vigilant regarding currency and market movements and their impact on the economy and prices.
• Consumption expected to increase gradually
• Accommodative monetary conditions are expected to continue for the time being

There was a report earlier that the BoJ may consider steps to reduce its purchases of government bonds, although the report did not specify when it might do so.

New forecasts (the previous round took place in January):

GDP:

• FY2024 +0.8% vs. previous 1.2% — consensus +0.9%
• Fiscal year 2025 +1.0% vs. previous 1.0% — consensus +1.0%
• FY 2026 (initial forecast): +1.0%

CPI excluding fresh products:

• FY2024 2.8% vs. previous 2.4% — consensus +2.3%
• FY2025 1.9% versus previous 1.8% — consensus +1.8%
• FY2026 (initial forecast): +%1.9

CPI excluding fresh products and energy:

• FY2024 1.9% vs. previous 1.9% — consensus +1.9%
• FY2025 vs previous 1.9% – consensus +1.8%
• FY2026 (initial forecast): %

There has been talk of a rise in CPI forecasts excluding fresh produce, partly due to rising oil prices, so this is not a big surprise.

The yen is at a new 34-year low following the decision, rising to 155.81 from 155.55 just before. I would attribute this to the absence of any action or strong indications of rate action, although I am curious to see how bond purchases evolve.