Bank of Japan Keeps Rates Steady, Focus On August

Economic data was of little importance as traders looked at the highly anticipated Bank of Japan monetary policy meeting, only to be disappointed in the overnight session. As expected, the decision was to leave the benchmark rate alone at 0.50 percent spurring further speculation that the August decision will be a hike of 25 basis points. Notably, the vote was cast as an 8-1 victory with the lone dissenter being Board member Atsushi Mizuno. Previously, member Mizuno and two other policy makers were unsuccessful in their first bid for a rate increase back in January, preceding a rate hike the following month. Fostering the overwhelming decision to leave rates steady seems to be concern that growth would be paring back in the second quarter.

Estimates are set on seeing 1 percent growth in the world?s second largest economy, vastly lower than the 3.3 percent in Q1. The notion will likely lend to further suppression in consumer prices, making interest rate hikes unwarranted. “There?s no change in our expectations that the economy will continue this lasting growth.” However, Governor Fukui noted in subsequent statements that expansion in the second quarter looks to be a “bit weaker than the first quarter” as steadfast focus remains on industrial output and inflationary indications. If output and CPI are any harbinger, traders may not see rate hikes any time soon. For the most recent month, industrial production fell for the third month running as prices declined for the fourth.