BOJ maintains ultra-low rates, opposing a global rate hike

The Bank of Japan (BOJ) intends to keep interest rates ultra-low, according to a statement released Thursday. This decision comes hours after the U.S. Federal Reserve (Fed) expected to raise rates. A new wave for yen selling, in turn, is likely to happen.

The policy variation between the BOJ and Fed resulted in the yen plunging to a 24-year low. These effects, in turn, pushed up the cost of imports, while inflation has remained above the 2% target for 5 months. 

Markets are waiting for the statement of Bank of Japan Governor Haruhiko Kuroda. Two scenarios are expected: the central bank could announce a sharp drop in the yen value, or change its view that recent cost-cutting inflation wouldn’t elevate in the long run.

"Consumer inflation in Japan is picking up faster than analysts forecast. This is partly due to the national currency weakening. It is becoming extremely difficult for the BOJ to talk about hiking prices as a short-term phenomenon,” noted Mari Iwashita, chief market economist at Daiwa Securities.

"Meanwhile, major central banks, including the Fed and the Bank of England, are about to shrink their own balance sheets. These actions highlight the BOE's dovish stance," Iwasita stressed. "I doubt the dollar's uptrend is complete."