The Bank of Japan maintains its inflation policy, which may usher in a turning point🤔
In Japan, macro focus has been on the Nikkei, which has gained 25% so far this year, and the Bank of Japan maintaining liquidity by maintaining its near-term policy outlook. Borrowing a famous quote from John Maynard Keyes, Governor Ueda said the Bank of Japan "will not change policy unless the facts change," with "facts" alluding to the possibility of sustainably achieving the 2% inflation target.
Today, with Japan's CPI inflation at its highest level in nearly 30 years (latest CPI +4.3%) and with plenty of rumors pointing to large-scale purchases of domestic stocks and real estate by foreign capital, we can debate whether Japan has reached an inflection point. Nonetheless, JGBs and USD/JPY both rebounded following the Bank of Japan's decision to maintain the status quo, with markets happy to embrace rising risk appetite again in this hot summer.
