Monetary authorities in Japan kept the policy rate steady, as expected. However, indications point to monetary policy tightening next year.

The Bank of Japan maintained its uncollateralized overnight call rate at 0.25%, as it continues to monitor inflation and economic growth. The policy board’s vote was 8-1 in favor of no action, though the BOJ remains on track to proceed with rate hikes in 2025.

What caused the move?



The decision was made as the BOJ continues to assess potential risks, including global economic activity, price levels, along with the wage- and price-setting behavior of domestic companies.

The BOJ noted that Japan’s economy has experienced moderate recovery, though some weaknesses persist. Public investment and exports growth have remained generally flat despite an upward trend in private consumption.

Additionally, the BOJ recognized the ongoing rise in services inflation. The central bank anticipates a gradual increase in inflation driven by rising wages. The impact of government measures to curb prices is also expected to diminish.

Asset impact

Japan’s benchmark Nikkei 225 Index rose by 0.73% as market participants digested the decision of keeping rates unchanged. The yen weakened against the dollar, moving from 155.1 to 155.3.

Overall, the strategy is to maintain a neutral stance, anticipating potential volatilities due to rising geopolitical tensions that could affect trade activity. Still, household consumption continues to improve, supported by increasing wage growth.

(Disclaimer: This is general investment information only and does not constitute an offer or guarantee, with all investment decisions made at your own risk. The bank takes no responsibility for any potential losses.)  

SOPHIA THERESE “PIA” BONIFACIO is a Markets Research Analyst at Metrobank’s Trust Banking Group, covering local and offshore macroeconomic research. She obtained her Bachelor’s degree in Economics with a Specialization in Financial Economics, cum laude, from the Ateneo de Manila University and is a Certified UITF Sales Person (CUSP). Pia enjoys long road trips and is a self-proclaimed milk tea connoisseur. 

ANNA DOMINIQUE CUDIA, MBA, CSS, is the Head of Markets Research at Metrobank’s Trust Banking Group, spearheading the generation and presentation of financial markets insights to clients. She used to be with Metrobank’s Investor Relations, where she brought in international awards and took part in various multi-billion peso and dollar capital raising activities. She holds a Master of Business Administration (Finance) degree, with distinction, from the University of London, and industry certifications in finance. She is a naturally curious person and likes to travel here and abroad.