The Bank of Japan (BOJ) has maintained its benchmark interest rate at around 0.25% during its recent meetings, reflecting a cautious approach amidst global economic uncertainties. This decision comes as the U.S. Federal Reserve (Fed) also expresses concerns about inflation risks, particularly with the impending inauguration of President-elect Donald Trump in January 2025, who has promised significant tariff hikes that could affect global markets. [80c6ff61]
On December 18, 2024, Fed Chairman Jerome Powell highlighted the increasing risks and uncertainties surrounding U.S. inflation, which has prompted the Fed to adjust its median projection for the federal funds rate at the end of 2025 from 3.4% to 3.9%. The Fed anticipates only two rate cuts of 0.25 percentage points in 2025, indicating a cautious stance moving forward. [80c6ff61]
In a similar vein, BOJ Governor Kazuo Ueda echoed these concerns during a press conference on December 19, 2024, stating that the BOJ would keep its interest rate unchanged for the third consecutive meeting. The yen has been under pressure, trading at ¥153.57-¥153.59 per dollar on December 18, and subsequently falling to lower ¥157 levels following the BOJ's decision. [80c6ff61]
Market analysts have noted that the yen's depreciation is a significant concern, as it could lead to increased inflation in Japan. Ueda mentioned that the BOJ might consider rate hikes if the weaker yen results in higher inflation, reflecting a potential shift in monetary policy depending on economic conditions. [80c6ff61]
As the BOJ and Fed navigate these economic challenges, they are closely monitoring inflation trends and wage growth, which are crucial for future policy decisions. The Nikkei Stock Average has also shown volatility, reflecting investor concerns over the yen's depreciation and the broader implications of U.S. economic policies under the Trump administration. [f3ab9f97]
In light of these developments, both central banks are expected to remain vigilant as they assess the impacts of U.S. trade policies and inflationary pressures on their respective economies. [f3ab9f97]