BoJ maintains rates and bond purchases, Yen falls

The Bank of Japan (BoJ) maintained its interest rates and continued its bond purchase program at 6 trillion JPY per month

By Farah Mourad | 14 June 2024

Yesterday's Producer Price Index (PPI) report was lowered by falling oil prices, boosting bullish market sentiment
Japan’s industrial production fell by 0.9% month-on-month in April
Gold prices remained above $2,300

Central Bank Actions: The Bank of Japan (BoJ) maintained its interest rates, aligning with market predictions. Additionally, the BoJ sustained its bond purchase program at 6 trillion JPY per month (approximately $38 billion).
Market Reaction: The decision to continue bond purchases at the previous rate was unexpectedly dovish. This led to a depreciation of the Japanese yen (JPY), making it the weakest performer among the G10 currencies at the time of writing.
Industrial Production: Japan’s industrial production fell by 0.9% month-on-month in April, against an expected decline of 0.1%. Year-over-year, production decreased by 1.8%, versus an anticipated 1.0% drop.
Currency Impact: Both JPY and New Zealand dollar (NZD) are showing the most significant declines.

Upcoming Data: The economic calendar is relatively light for the day ahead. Key releases include:
- Final Consumer Price Index (CPI) data for May from France.
- University of Michigan data.
- Speeches from members of the European Central Bank (ECB) and Federal Reserve (Fed).

Producer Price Index (PPI): The latest PPI data, driven lower by falling oil prices, boosted bullish sentiment in the market. Investors are now anticipating two 25 basis point rate cuts in 2024, likely in September or November and December.
Gold: Gold prices are managing to stay above $2,300 but are struggling to attract significant buying interest. A more hawkish Fed outlook on interest rates is creating headwinds for gold. However, signs of easing inflation support the possibility of a rate cut in September, providing some support for the precious metal.