Bank of Japan to hold off on raising interest rates

The day before the decision Bank of Japan The country's currency is losing value as the chances of another interest rate hike dwindle to near zero. Despite projected wage growth in the economy, uncertainty over tariffs seems to prevent another hawkish turn at this point.

For the Bank of Japan, one of the key factors that underpin the resumption of the trend of tightening monetary conditions for a long time is wages.. These are doing well, as average monthly wages in Japan rose 3,1% year-on-year, the fastest pace in over 32 years. With wages rising so quickly, it’s not hard to assume significant price pressures will pick up in the medium term, which naturally gives the BOJ the green light to raise rates (most likely in May).

BoJ concerned about economic slowdown

However, BoJ council members may believe that inflation is not yet high enough to justify further rapid rate hikes, as the domestic economy and prices are generally moving within expected ranges. Remember, the BoJ has already raised interest rates 3 times, from -0,10% to 0,50% (most recently in January).

The BoJ has yet to determine exactly how the January rate hike will impact tariff policy and how it could affect prices in Japan, Nikkei sources said.The BoJ is increasingly concerned about a possible global economic slowdown as U.S. President Donald Trump announced he would raise tariffs on a range of imported goods, prompting affected countries to respond accordingly.

Currently, the Japanese yen, mentioned earlier, is doing the worst on the Forex market. On the other hand, we are once again seeing significant increases in the euro. The Polish złoty is also gaining value. The dollar is currently worth PLN 3,8176, the euro PLN 4,1815, the pound PLN 4,9642, and the franc PLN 4,3400.

Source: Mateusz Czyżkowski, XTB