The Bank of Japan kept its policy rate at 1.0% at its July Monetary Policy Meeting, but expectations of another rate hike have strengthened in the market following the yen's depreciation and intervention from late July through early August. The effects on mortgages, deposits and investments are examined from 3 perspectives.
At its 31 July meeting, the Bank of Japan kept the target for its policy rate at 1.0%. The Bank had raised the rate from 0.75% at its June meeting, and the July decision was viewed as a brief pause to assess the effects. The vote at the meeting was 8 in favor and 1 opposed, with the dissenting opinion calling for a hike to 1.25%.
From late July through early August, the government and the Bank of Japan were believed to have conducted large-scale yen-buying intervention against the backdrop of the yen's depreciation, and the Japanese and US finance authorities publicly stated that the intervention was coordinated. As a result, market expectations of a rate hike at the next meeting in September strengthened rapidly, with a hike by the October meeting now priced in.
The prevailing view is that the current situation does not mean that rate hikes are over, but rather that the countdown to the next hike is under way. In the interest rate swap market, the probability of a September hike exceeded 60% as of early August, which is also likely to affect household financial planning.
This article examines upcoming changes and key points to check from 3 perspectives: mortgages, deposits and investments.