BOJ Keeps Interest Rate Near 1.25% Amid Mixed Signals from Tankan Survey
The Bank of Japan (BOJ) kept its short-term interest rate near 1.25% after the September hike, marking a continuation of Japan's exit from ultra-low interest rates.
The latest Tankan survey showed strong manufacturing sentiment, with the index for large manufacturers reaching +24, its highest level since March 2018. However, the index for large nonmanufacturing companies fell to +35 from +37, indicating pressure from higher costs and weaker consumer demand.
Corporate inflation expectations remain elevated at around 2.6% over a three-year horizon and 2.5% over five years, giving the BOJ room to continue monitoring the data. The rate hike affects more than just borrowing costs within Japan, as it impacts global bonds, currency positions, and carry trades.