Sep 12, 2023

Japanese equities have been under selling pressure following the Bank of Japan’s (BOJ) announcement that it may end its zero interest rate policy at the beginning of 2024.

JPN 225 Daily Chart

JPN 225: Daily Chart

The Nikkei 225 Stock Average fell for a third consecutive day on Monday, but was able to rebound from earlier losses. The index closed at 26,652.02, down 0.2%. There is still a risk of the index falling to the 32,300 level, which is its 200-day moving average.

Global stock indices slid last week on economic fears. The Nikkei also dropped after BoJ governor Kazuo Ueda said negative rates could end in 2024 if wage inflation persists.

“Once we’re convinced Japan will see sustained rises in inflation accompanied by wage growth, there are various options we can take,” Ueda was quoted as saying.

“If we judge that Japan can achieve its inflation target even after ending negative rates, we’ll do so,” he added.

With inflation having exceeded the bank’s 2% target for more than a year, markets have speculated that the Bank of Japan (BOJ) will soon start raising interest rates. However, BOJ Deputy Governor Masayoshi Ueda has maintained his support for the ultra-loose policy until the BOJ is sure that inflation will remain higher.

Ueda said in the interview that the BOJ will “patiently” maintain an ultra-loose policy for the time being.

The news sent the Japanese yen soaring after a poor performance against the US dollar due to an aggressive Federal Reserve. Higher inflation in the coming readings could have a negative effect on the Nikkei.

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