The Bank of Japan (BoJ) announced in its March 2024 monetary policy meeting that it would end policies such as negative interest rates and yield curve control, signaling a shift in its monetary policy. However, we expect that the impact of this decision on the economy and financial markets will be limited.
What is important is the pace of future interest rate hikes and where the policy rate will peak. The next rate hike could occur as early as this year. However, we anticipate that the pace of rate hikes will be moderate and the policy rate will not reach a high level.
Looking ahead over the next 1 to 3 years, there is a possibility that interest rates will rise to some extent, the yen will strengthen against the dollar, the economic stimulus effect will diminish, and the flow of investment funds will change. There is also a risk that fiscal conditions and other economic aspects will be affected.
Full article: pdf Bank of Japan's Monetary Policy Shift and Its Future Implications
Written by Takahiro Nakano, Strategist, Asset Management One Co., Ltd