The cautious attitude of the Bank of Japan towards raising interest rates has triggered sustained weakness in the Japanese yen

The Bank of Japan (BOJ) released the minutes of its monetary policy meeting from October 30th to 31st on December 24th. Records show that decision-makers unanimously agree that if the economic and price trends meet expectations, interest rates will continue to rise. However, due to the uncertainty of the outlook, especially the risks of overseas economies such as the United States, and the continued instability of financial markets, the attitude of the Bank of Japan has turned cautious, causing the yen to weaken again.

At the October meeting, the Bank of Japan maintained its policy interest rate at 0.25% and predicted that inflation rates would approach the target level of 2% in the coming years. This suggests that the central bank may increase borrowing costs in the near future. However, due to the increasing uncertainty both domestically and internationally, the Bank of Japan ultimately chose to postpone interest rate hikes at the end of October.

In addition, at the latest meeting on December 19th, the Bank of Japan voted 8-1 to keep interest rates unchanged, with board member Naoki Tamura voting against it. This decision reflects the decision makers' desire to spend more time examining whether salary growth will stabilize the inflation rate around the 2% target. Bank of Japan President Kazuo Ueda stated at a press conference after the meeting that the central bank needs to closely monitor the future direction of overseas economies and the development of currency and capital markets, and evaluate their impact on the economic and price prospects.

Analysts point out that the Bank of Japan may decide whether to adjust its monetary policy after observing wage growth in 2025 and the policy direction of the new US government. Therefore, in the short term, the Bank of Japan may continue to maintain the current interest rate level until clearer economic signals emerge.

The cautious attitude of the Bank of Japan reflected in the market, triggering another decline in the yen. Since December, the Japanese yen has fallen by about 4.8% against the US dollar.