Instant view: Investors react to BOJ’s interest rate hike
(Reuters) – The Bank of Japan said on Wednesday it is raising its short-term interest rate to 0.25% and will gradually reduce the amount of bonds it is buying under its quantitative easing programme.
At the end of its two-day policy meeting, the central bank said the decision to raise its policy rate was unanimous and the amount of bonds it buys per month will fall to 3 trillion yen ($19.65 billion), half the current rough target, by early 2026.
Yields on government bonds fell slightly on the news, while the yen kept its early gains against the dollar.
QUOTES:
MATT SIMPSON, SENIOR MARKET ANALYST, CITY INDEX, BRISBANE
“Bots were quick to bid the yen on the surprise of a 15-basis-point hike, but gains were just as quick to evaporate on the hollow headline numbers.
“Yes, the BOJ hiked more aggressively the 10bp expected, but they fell short on their ‘detailed plan’ of tapering.
“And in the grand scheme of things, the 15bp hike still takes their interest rate to 25bp. I suspect the yen will weaken heading into the FOMC meeting later today.”
FRED NEUMANN, CHIEF ASIA ECONOMIST, HSBC, HONG KONG
“The BOJ took the plunge. Despite sluggish consumer spending, monetary officials sent a decisive signal by raising interest rates and allowing for more gradual balance sheet reduction. Despite sluggish consumer spending, rising wages are offering room for optimism that growth will recover in the coming quarters. Rising inflation expectations also open the path for ongoing monetary policy normalization by the BOJ. Barring major disruptions, the BOJ is on course to tighten further, with another interest hile by the start of next year.”
($1 = 152.6500 yen)
