Bank of Japan keeps Japanese Interest Rates on hold at 0.50%

By: Sarah_Jones

The Bank of Japan kept interest on hold at 0.50%, following last Februarys hike from 0.25%.

This follows recent data which showed that inflation (CPI) fell in February to 0.1%, which again raised the specter of deflation that Japan has suffered from since the early 1990's property bubble collapse.

Any further rise in Japanese interest rates this year is dependant on the Japanese economy and inflation figures. The slowdown in the US economy is expected to impact on the Japanese economy and thus relieve pressure for a interest rate rise during the rest of the year, which will have the effect of supporting the US Dollar against a weak Yen.

Recent talk of the demise of the Yen carry trade looks increasingly premature, with a weakening yen and little sign of further raising in Japanese interest rates to result in the yen carry trade continuing for some time leading to more liquidity being pumped into the global financial markets, and thus likely to support the US Bond market as well as wider inflation and the commodity bull markets.

Sarah Jones

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