(22JANUARY 2019)DAILY MARKET BRIEF 1:Japan interest rates won’t change

The Bank of Japan (BoJ) will maintain its policy rate unchanged at -0.10% at tomorrow’s monetary policy meeting. This comes on the heels of a recent cut in forecasted GDP growth for 2019 to 1.30%. BoJ is even more pessimistic, expecting growth below 1%. The Japanese economy faces growing risk of a recession: BoJ is expected to cut projections of inflation, and lower oil prices continue dragging overall prices downward. December’s consumer price index expanded at a much slower pace of 0.30%, its lowest in 9 months on an annual basis, well off the target of 3%. Despite a decent rise in the government’s 2019 budget to JPY 101.46 trillion (USD 900 billion), it seems that capital spending and private consumption, Japan’s growth engine, are expected to stay flat in 2019 (2.70% and 1.20% respectively).

USD/JPY, currently trading at 109.47 (-0.26% year-to-date), is expected to rise following Wednesday’s BoJ meeting.