BoJ Announcement (Tue):

Participants will be eyeing whether the central bank exits its negative interest rate policy as money markets are pricing a near coin flip between the central bank maintaining its rate at the current level of -0.10% or if it hikes this by 10bps to 0%. There has been plenty of speculation for the central bank to act following several hawkish source reports and commentary leading up to the meeting suggesting the BoJ was mulling a March hike although it was said to be too close to call as officials are currently split between March or April and a final decision is to be taken after the first wage talks tally. Other source reports also noted that the BoJ is said to review Yield Curve Control and will likely ditch its 10-year bond yield target upon pulling short-term rates out of negative territory with the central bank to consider a new quantitative monetary policy framework and is mulling buying nearly JPY 6tln of JGBs under a new policy framework. There has also been a wave of more hawkish-leaning central bank rhetoric including from BoJ Governor Ueda who stated that confidence has grown in the achievement of the price target. However, his more recent comments were less hawkish as he noted that they see weakness in the consumption of non-durable goods and need to see if a virtuous cycle is underway, as well as stressed data dependency in reaching an appropriate monetary policy decision. Other officials have also provided a more hawkish tone as Board Member Takata stated he would call for a gear shift in policy and that the achievement of the price target is coming into sight although he had not made up his mind when asked about whether to end negative interest rates in March or April. Board Member Nakagawa also stated that prospects of sustainably achieving the 2% inflation target are gradually heightening and it will take until autumn and beyond if they were to wait until smaller firms' wage negotiation outcome, while she added they don't necessarily need to wait for all small and mid-sized firms' wage talks results in deciding when to end negative rates. As such, with the RENGO 1st wage tally showing wage growth of 5.28% (exp. 4.1%; 2023 final figure 3.6%) expectations have heightened that the BoJ will end its negative interest rate policy next week. Aside from the decision on interest rates and yield curve control, participants will also be eyeing the central bank's intentions regarding other measures such as its ETF buying as the BoJ had previously stated it would be natural to end such purchases if the achievement of the 2% price target can be foreseen.