BoJ December 2024 meeting minutes express caution – January brought change though

The December meeting was a bit of a dud. The BoJ hiked rates in January.

This is from the minutes of the December meeting, in brief. This summary highlights the BoJ’s cautious stance on rate hikes, concerns about inflation persistence, and the impact of global uncertainties on Japan’s economy. The bank overcame such caution at the January meeting.

1. Monetary Policy & Market Operations

   • The Bank of Japan (BoJ) maintained the uncollateralized overnight call rate around 0.25% as per its previous guideline.
   • Government bond purchases continued as planned, with monthly JGB purchases of ¥4.9 trillion.
   • The liquidity in JGB markets improved, but concerns about future market functioning remain.

2. Financial Markets & Economic Conditions

   • Japanese economy showed moderate recovery, supported by improving corporate profits and stable employment, though some weakness remains.
   • The Tokyo Stock Price Index (TOPIX) remained stable, moving in line with U.S. stock market trends but weighed down by concerns over U.S. tariff policy.
   • Inflation remains in the 2.0-2.5% range, supported by rising services prices and wage growth, though the impact of past import price increases has faded.
   • The yen appreciated against the euro, while remaining stable against the U.S. dollar.

3. Global Economic Outlook

   • The U.S. economy remained solid, led by consumer spending, though uncertainty surrounds the incoming U.S. administration’s policies.
   • Europe showed signs of bottoming out, though challenges persist, particularly in Germany and France.
   • China’s recovery slowed, with pressure from real estate and labor market adjustments, despite government stimulus.
   • Emerging economies improved, driven by a rebound in IT-related exports.

4. Monetary Policy Review & Outlook

   • The BoJ reviewed its long-term monetary policy since the late 1990s, acknowledging both benefits and side effects of large-scale monetary easing.
   • Policymakers discussed the importance of sustainable inflation near 2%, emphasizing the need for cautious adjustments to monetary policy.
   • While some members pushed for an interest rate hike to 0.5%, the majority voted to keep rates unchanged at 0.25%, citing uncertainties in wage growth and global economic conditions.

5. Government & Policy Board Perspectives

   • The Japanese government urged the BoJ to ensure inflation remains stable while cooperating closely with policymakers.
   • The BoJ reaffirmed its cautious approach, stating that any future policy adjustments will depend on inflation trends, wage growth, and global economic risks.

6. Policy Decision & Votes

   • Majority voted to keep rates at 0.25%, rejecting a proposal to raise them to 0.5%.
   • The official policy statement was unanimously approved, confirming continued monetary easing while monitoring inflation and financial stability.

This article was written by Eamonn Sheridan at www.forexlive.com.