23rdJanuary 2024
Tuesday
On January23rd, a pivotal day for financial markets, Japan and New Zealand are poised tomake major announcements that could impact global economics. The Bank of Japanis scheduled to reveal its Interest Rate Decision, a critical moment that couldinfluence financial trends and strategies. Simultaneously, New Zealand is setto disclose its Consumer Price Index (CPI) on a quarterly basis, providing keyinsights into the country's economic health and inflation trends. These announcementsare eagerly awaited by investors and policymakers alike, as they could havesignificant implications for international financial markets.
JPY – Bank of Japan Interest Rate Decision
Short-term interest rates stand as the mostcrucial element in currency valuation, with traders primarily focusing on otherindicators to forecast future rate changes.
In its finalmeeting of the previous year, the Bank of Japan (BoJ) unanimously decided tomaintain its key short-term interest rate at -0.1% and the 10-year bond yieldsat around 0%, as was widely anticipated. The BoJ also kept the flexible upperlimit of 1.0% for long-term government bond yields unchanged. In response tothe high level of uncertainty both domestically and internationally, the bank committedto continuing its monetary easing policy. The central bank emphasized itsstrategy to adapt to changes in economic activity, price trends, and financialconditions, with the goal of achieving a sustainable 2% inflation target, intandem with wage increases. The BoJ also stated its willingness to takeadditional easing measures if necessary, a stance reinforced by Governor KazuoUeda's remarks on the lagging wage increases compared to rising prices andconcerns about sustaining the target inflation level.
TL;DR
Aspect
Details
1 Meeting Date
Final meeting of the previous year
2 Decision on Rates
Key short-term interest rate: Maintained at -0.1%- 10-year bond yields: Kept around 0%
3 Upper Limit on Yields
Flexible upper limit for long-term government bond yields: Unchanged at 1.0%
4 Monetary Policy
Continued commitment to monetary easing due to high domestic and international uncertainty
5 Strategic Focus
Adapting to changes in economic activity, price trends, and financial conditions
6 Inflation Target
Aiming for a sustainable 2% inflation target in tandem with wage increases
7 Governor's Remarks
Kazuo Ueda expressed concerns about lagging wage increases compared to rising prices and challenges in sustaining inflation target
8 Future Measures
Willingness to take additional easing measures if necessary
The forecastsuggests that there will be no change in the upcoming announcement, with theinterest rate expected to remain at the previous level of -0.1%.
The next InterestRate Decision from the Bank of Japan is scheduled for release at 03:00AM GMT on January 23rd.
The last time,the Bank of Japan announced its Interest Rate Decision on the 19thof December, 2023. You may find the market reaction chart (USDJPY M5) below:
NZD – CPI q/q
Inflation,primarily driven by consumer prices, plays a significant role in currencyvaluation. This is because increasing prices prompt central banks to hikeinterest rates, adhering to their mandate to control inflation.
In September2023, New Zealand experienced a significant rise in its Consumer Price Index(CPI), with an increase of 1.80% compared to the 1.1% growth seen in theprevious quarter. The transportation sector was notably impacted, showing a7.1% surge. This was largely attributed to increased costs in private transportsupplies and services, which went up by 11.6%, along with a 2.8% rise invehicle purchases, and a 3.2% increase in passenger transport services.
The housing andhousehold utilities sector also witnessed a considerable growth of 1.7%. Thiswas primarily driven by a sharp 9.4% increase in property rates and relatedservices, a 1.2% rise in actual rentals for housing, and a 0.6% hike inhomeownership costs.
Additionally,the food sector recorded a 0.9% increase. Significant contributors to this risewere restaurant meals and ready-to-eat food, which went up by 1.7%, fruit andvegetables increasing by 0.9%, and grocery food seeing a modest rise of 0.2%.
These figuresfrom September 2023 depicted a notable shift in New Zealand’s cost of livingand consumer spending, presenting considerable implications for both householdsand the business sector.
TL;DR
Sector
Percentage Increase
Key Contributors
1 Overall CPI Increase
1.80%
Compared to 1.1% in the previous quarter
2 Transportation
7.1%
Private transport supplies and services: +11.6% - Vehicle purchases: +2.8% - Passenger transport services: +3.2%
3 Housing and Household Utilities
1.7%
Property rates and related services: +9.4% - Actual rentals for housing: +1.2% - Homeownership costs: +0.6%
4 Food
0.9%
Restaurant meals and ready-to-eat food: +1.7% - Fruit and vegetables: +0.9% - Grocery food: +0.2%
The forecast forthe upcoming New Zealand CPI q/q suggests a figure of 0.3%,compared to the previous quarter’s result of 1.8%.
The upcoming New Zealand CPI q/q isset to be announced at 9:45 PM GMT on January 23rd.
The last time, the New Zealand CPI q/qwas announced on the 16th of October, 2023. You may find the marketreaction chart (NZDUSD M5) below:
