BoJ Keeps Rate Unchanged For Third Straight Session

(RTTNews) - The Bank of Japan left its key interest rates unchanged for the third straight session on Thursday as it awaits more information on spring wage negotiations amid higher uncertainty over the US government policies.

At the policy board meeting, members voted 8-1 to maintain the uncollateralized overnight call rate to remain at around 0.25 percent. This was the highest since late 2008.

The BoJ had ended its negative interest rate policy in March and last lifted the interest rate in July to 0.25 percent. So far the BoJ has tightened the policy twice this year.

Tamura Naoki sought a 50 basis point hike today. With economic activity and prices developing in line with the Bank's outlook, risks to prices had become more skewed to the upside, the sole dissenter said.

BoJ Governor Kazuo Ueda reportedly said that the bank will need to scrutinize various data before reaching a decision on policy easing.

The Bank is likely to hike its rates by 25 basis points at its next meeting in January, Capital Economics' economist Marcel Thieliant said. The BoJ will lift rates to 1.25 percent by the end of 2026, above the 1.00 percent peak that the analyst consensus is expecting.

In November, core inflation remained above the 2 percent target but slowed slightly to 2.3 percent from 2.4 percent.

Capital Economics' economist said the upcoming Shunto wage negotiations will bring another sizeable pay hike and in turn, keep services inflation buoyant in the near term.

The board said it is necessary to pay due attention to developments in financial and foreign exchange markets and their impact on Japan's economic activity and prices.

"In particular, with firms' behavior shifting more toward raising wages and prices recently, exchange rate developments are, compared to the past, more likely to affect price," the bank said.

Separately, in a policy review released on Tuesday, unconventional measures including large scale monetary easing have its own side effects and caveats. "The Bank should not exclude at this point any specific measures when considering the future conduct of monetary policy," the BoJ said.