The yen weakened against the dollar on Monday following reports suggesting that the Bank of Japan (BoJ) is unlikely to exit its negative interest rate policy in its final meeting of 2023.
According to sources familiar with the matter, BoJ officials are awaiting further evidence of sustained inflation and signs of wage growth before considering a shift in their decades-long policy. A final decision will be made after analyzing data, including financial market conditions and the quarterly tankan survey of economic conditions, which is scheduled for release on Wednesday.
These developments may come as a disappointment to those who were anticipating a significant policy change at the December 19 meeting. Last week, comments made by BoJ Governor Kazuo Ueda and Deputy Governor Ryozo Himino had sparked expectations of a policy shift, leading to a surge in the yen and Japan bond yields.
However, the dollar gained 0.7% against the yen, reaching 146.10 yen on Monday. Simultaneously, the 10-year Japanese government bond rose by 6 basis points to 0.78%. The Nikkei 225 index, one of the top-performing global stock exchanges in 2023 with a 25% increase, saw a gain of 1.5%.
In addition to the BoJ decision, the Federal Reserve, Bank of England, and European Central Bank will all hold their final meetings of the year this week.