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Economic Indicator Bank of Japan Interest Rate Decision and Monetary Policy Statement

Current Interest Rate: 0.1%

Next Release: Thursday, July 11, 03:00 GMT

Source of Report: Bank of Japan

Upcoming Release Commentary:

The Policy Board of the Bank of Japan decided to maintain the quantitative and qualitative monetary easing policy at its June 11 meeting. The bank will continue to increase the monetary base at an annual pace of about 60-70 trillion yen, and purchase Japanese government bonds so that their amount outstanding increases annually at about 50 trillion yen.

Japan’s economy is expected to pick-up on the back of a rebound in exports. Public investment has continued to increase, while private consumption has remained resilient. The central bank is likely to maintain its current policy stance, and will examine both upside and downside risks to economic recovery. Traders will focus on the Bank of Japan’s updated near-term forecast for the economy, where it is expected to reaffirm its optimistic view.

Historical Overview of Japan’s Interest Rate Decisions:

Release Date       Actual        Forecast      Previous
June 11, 2013        0.10%         0.10%         0.10%
May 22, 2013        0.10%         0.10%         0.10%
April 26, 2013        0.10%         0.10%         0.10% 
April 04, 2013         0.10%         0.10%         0.10%
March 07, 2013         0.10%          0.10%         0.10%
February 14, 2013         0.10%         0.10%         0.10%
January 22, 2013           0.10%          0.10%         0.10%
February 01, 2013         0.10%         0.10%            0.10%   
December 20, 2012         0.10%         0.10%           0.10%
November 20, 2012        0.10%          0.10%             0.10%
October 30 2012        0.10%         0.10%         0.10% 
October 05, 2012        0.10%         0.10%         0.10%
September 19, 2012        0.10%         0.10%         0.10%

 How it impacts the Japanese Yen

The BoJ’s interest rate decision has far-reaching consequences, impacting domestic consumer loans, bonds, mortgages and the exchange rate of the yen. If the central bank is hawkish about the inflationary situation in the economy and raises the interest rates, it is positive, or bullish for the yen, because short-term interest rates are the primary factor in currency valuation. Conversely, if the BoJ has a dovish view on the economy, and decides to cut the interest rate, or keep it unchanged, it is generally considered to be negative, or bearish for the currency.

Understanding Interest Rates:

The Policy Board of the Bank of Japan meets once a month for two days to discuss economic developments in the country. The board is the Bank’s highest decision-making body, and has nine members, including the Governor, his two deputies, along with six board members. The board’s main responsibility is to ensure price stability by changing the discount rate. The discount rate is the rate charged by the BoJ when extending loans to private financial institutions. An official monetary policy statement is released by the board at the end of each meeting, where announcements regarding any adjustment to interest rates are made, as well as the economic conditions that influenced their decision. Since the rate decision is often priced into the market, traders tend to attach more importance to the monetary policy statement. The statement provides projections about the economic outlook of the country and offers clues on the outcome of future interest rate decisions.