japan takes wait-and-see attitude towards us rate cut
2024-09-21
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pedestrians walk past an electronic stock index display screen in tokyo, japan, on august 6. photo by xinhua news agency reporter yue chenxing
after the fed cut interest rates, the bank of japan chose to "stand still" and maintained the policy interest rate at 0.25%. the bank of japan believes that in the case of unclear domestic and international political and economic situations, the risk of unexpected price increases is decreasing due to the appreciation of the yen, and there is no need to further raise interest rates. in addition, it is necessary to further evaluate and observe the actual effect of the last interest rate hike and its impact on economic and social operations.
on september 18, the us federal reserve announced that it would lower the target range of the federal funds rate by 50 basis points to between 4.75% and 5.00%, and the us monetary policy began a new round of easing cycle. after the fed cut interest rates, the bank of japan chose to "stand still". at the monetary policy meeting held on september 19 and 20, the bank of japan decided to keep the policy interest rate unchanged at 0.25%, which was consistent with the general predictions of the economic community and the market.
the bank of japan believes that in the context of the unclear political and economic situation at home and abroad, the risk of price increases exceeding expectations is decreasing due to the appreciation of the yen, and there is no need to raise interest rates further at present. another reason for maintaining the policy interest rate unchanged this time is that the rapid appreciation of the yen caused by the interest rate hike in july brought about the negative effects of the stock market crash and violent fluctuations in the financial market. the bank of japan believes that it is necessary to further evaluate and observe the actual effect of the last interest rate hike and its impact on economic and social operations.
after the fed cut interest rates, the yen exchange rate and the japanese stock market fluctuated along with the fed's interest rate cut. after the fed's decision was announced, the yen exchange rate once rose to 140 yen per dollar. later, due to the cautious attitude of fed chairman powell on future large-scale interest rate cuts at the press conference, and the increase in actual demand for us dollars by japanese import companies, the yen exchange rate once fell to 144 yen per dollar in the foreign exchange market on the 19th. since then, the decline has gradually rebounded and returned to 142 yen per dollar.
in the stock market, due to the depreciation of the yen and the rising view that the interest rate gap between japan and the united states will not narrow rapidly, the nikkei 225 index rose by more than 1,000 points on the 19th, and finally closed at 37,155.33 points. on september 20, asia-pacific stock markets rose across the board, with japanese stocks leading the rise by 2%. some analysts believe that the market is looking forward to a soft landing of the us economy. the dow jones average has broken through 42,000 points for the first time in history, driving the rise of japanese stocks and even asia-pacific stock markets. japanese media believe that after the yen-dollar exchange rate broke through the 145 yen level expected by japanese companies in 2024, the inverse correlation between the yen and the topix stock price index (topix) has increased, indicating that the stock market remains vigilant about the risk of performance impairment of export companies caused by the appreciation of the yen. in addition, vigilance against the appreciation of the yen is also reflected in the performance differences between japanese stocks and asian stocks. the rise and fall rate of topix has been lower than the msci asia pacific index for six consecutive months, setting a record since 2007.
currently, the japanese government and central bank are in a "wait-and-see" period to assess the impact of the fed's rate cut and summarize the effect of the bank of japan's rate hike in the previous period. at a press conference on the morning of the 19th, japanese chief cabinet secretary yoshimasa hayashi said that the impact of the fed's rate cut decision on the japanese economy and financial markets is difficult to generalize due to the influence of multiple factors such as external demand and overseas price trends, and will continue to pay attention to the follow-up situation.
some japanese economists believe that the fed's sharp interest rate cut is a potential destabilizing factor in the financial market. the fed has entered a cycle of interest rate cuts, while the bank of japan is in a cycle of interest rate hikes. in fact, the monetary policies of japan and the united states have experienced a rare situation of reverse changes. although the current financial market is relatively stable, the depreciation of the us dollar and the appreciation of the japanese yen in the foreign exchange market may cause instability in international capital flows centered on japan and the united states. there is also a view that historically, the united states has only seen a sharp interest rate cut of 50 basis points in emergencies such as financial crises, which actually reflects the severe situation of the us economy, including the weak labor market. if the united states falls into an economic recession, the japanese economy will not be able to remain immune, and the bank of japan's plan to raise interest rates may be frustrated.
the bank of japan is still looking for the right time for the next rate hike. during the parliamentary recess in august, bank of japan governor kazuo ueda stressed that if economic and price expectations are largely realized, the basic stance of gradually adjusting monetary easing will not change, expressing his determination to continue to raise interest rates. regarding the forecast of the bank of japan's next rate hike, some economists believe that if the inflation data in october meets the bank of japan's expectations, the bank of japan may raise the policy rate by 25 basis points to 0.50% at the december monetary policy meeting.
some people believe that for a period of time, the foreign exchange market's expectations for the narrowing of the interest rate gap between japan and the united states were too strong, and there was an "abnormal" trend of selling us dollars and buying japanese yen. in the past two months, the yen-to-dollar exchange rate once rose from 161 yen to 139 yen, which is actually an "overdraft state" of the value of the yen. as the bank of japan slowed down its pace of interest rate hikes this time, coupled with the federal reserve's negative statement on a sharp reduction in interest rates in the future, the market's expectations for a rapid narrowing of the interest rate gap between japan and the united states will ease, and the situation of a further sharp rise in the yen exchange rate may change. in addition, according to japanese media reports, the "structural selling of yen" by japanese households through the purchase of overseas assets still exists, which may also be one of the reasons for slowing down the rise in the yen exchange rate. how the bank of japan will deal with the "overdrafted" interest rate hike expectations and the uncertain domestic and international political and economic situation to ensure that subsequent policy adjustments are effective remains to be further observed. (source: economic daily author: chen yitong)
source: economic daily
