ForexLive Asia-Pacific FX news wrap: Bank of Japan leaves rates unchanged, yen slumps

• Recapping the Bank of Japan monetary policy decision today – rates unchanged again
• Reserve Bank of New Zealand forecast to cut by 50bp in February, then by 25 in April & May
• USD/JPY jumps above 155.20 after BoJ votes 8 – 1 to leave rates unchanged again
• Bank of Japan comprehensive review on past monetary easing steps
• Bank of Japan leaves rates unchanged, as expected
• The BoJ hiked rates in March and July – how is December shaping up?
• Westpac forecasts the Reserve Bank of New Zealand to cut cash rate to 3.25% by May 2025
• ICYMI – Federal Reserve Chair Powell says “We’re not allowed to own bitcoin”
• Three reasons China is taking over the global car market
• PBOC sets USD/ CNY reference rate for today at 7.1911 (vs. estimate at 7.3165)
• FOMC topside inflation risk surge (from 3 in September to 15 in December)
• Australian Inflation Expectations (December 2024) 4.2% (prior 3.8%)
• New Zealand December business confidence 62.3 (prior 64.9)
• The Hong Kong Monetary Authority has cut its base interest rate by 25bp, as expected
• South Korea again says preparing FX stability and liqudity measures
• New Zealand “dramatically worse than anyone had expected” – RBNZ could cut by 75bp in Feb
• Here’s a view saying BoJ to hike today (or maybe January!) – stronger yen in months ahead
• 5 key take home points from FOMC day – nailed it or failed it?
• New Zealand dollar falls even further after GDP plunges
• Trump notified Japan that meeting with PM Ishiba possible in mid-January
• New Zealand Q3 GDP -1.0% q/q (vs. -0.4% expected)
• Trump-Vance statement calls for more US debt – “increase the debt ceiling”
• New Zealand Q3 GDP data is due imminently – contraction expected
• US stocks fall sharply after the Fed trims expectations for cuts in 2025
• Forexlive Americas FX news wrap: US dollar soars on hawkish dots
• Trade ideas thread – Thursday, 19 December, insightful charts, technical analysis, ideas

Before
we get to the Bank of Japan news a quick trip to New Zealand. Q3 GDP
data were released today, with a huge 1% contraction q/q, much worse
than expected, and a 1.5% contraction y/y, also much worse than
expected. The Reserve Bank of New Zealand are not scheduled to meet
again until February 19. Expectations for a 50bp rate cut at that meeting have
heightened (and further cuts to follow in subsequent meetings).

I’d
urge some perspective on this. Q3 data covered July, August and
September. The Reserve Bank of New Zealand rate cutting cycle
commenced in August, then continued in November and December. It’ll
take time for these cuts to feed into the economy. There are some
expectations that Q3 will be the nadir and Q4 should show growth. We
won’t see that data (Q4 GDP) until March (!) but we did get a wee
sign of ‘green shoots’ in later data released today. The ANZ
Business Survey for December showed activity at firms improved to a
fresh 10-year high during the month.

NZD/USD
added to its FOMC/Powell slump, falling to lows under 0.5610 before
showing some sign of stabilising. AUD/USD was dragged down a little
alongside to ping 0.6200.

The
Bank of Japan kept its short-term policy rate unchanged at 0.25%,
with an 8-1 vote. Board member Naoki Tamura, a policy hawk,
dissented. He proposed raising rates to 0.5%, citing rising
inflationary risks. Next up is Governor Ueda’s press conference,
due at 0630 GMT / 0130 US Eastern time. I suspect Ueda might sound a
more hawkish note than the Statement did. Today was a pause, not the
end of the Bank’s normalisation cycle.

The
yen weakened, adding to its losses from FOMC/Powell on Wednesday, US
time. USD/JPY traded up to highs circa 155.44.

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