According to ChainCatcher news, IG Group analysts state that the Bank of Japan (BOJ) faces the challenge of balancing ongoing inflationary pressures against slowing economic growth. The price of rice, a staple for Japanese households, has doubled in the past year, highlighting the severity of inflationary pressures.
Since April 2022, the core inflation rate has remained at or above the Bank of Japan's 2% target, putting increasing pressure on interest rate hikes.
However, economic growth has noticeably worsened, with GDP contracting at an annualized rate of 0.2% in the first quarter. Additionally, due to rising inflation, real wages have decreased by 1.8% year-on-year, which may suppress consumer spending and further constrain economic growth. Although the Bank of Japan is likely to keep interest rates unchanged at today's meeting, any hawkish guidance could provide significant support for the yen. It is essential to closely monitor the policy statement and comments from the press conference for hints regarding future tightening measures.