[Bank of Japan Monetary Policy Meeting Preview] Depending on the outlook for maintaining the status quo and statements aimed at raising interest rates, the flow of “yen appreciation = stock depreciation” may accelerate

The Bank of Japan will hold the last monetary policy meeting of the year on the 18th to 19th, announce the details of the decision around noon on the 19th, and Governor Kazuo Ueda will hold a press conference in the afternoon. Although an exit toward normalization of monetary policy is being recognized, the current large-scale monetary easing policy is being maintained,There is a strong view that negative interest rates will not be lifted。 This time, negative interest rates will be lifted after the beginning of the year, etc.Attention is being paid to whether there will be statements that go a step further about the prospects for interest rate hikes。 Depending on the content of the statement, there is a possibility that the “appreciation of yen = stock depreciation,” which was strengthened by interest rate cut discussions at the US FOMC on the 13th and suggestions for interest rate cuts three times in 2024, will accelerate further.

The December meeting is expected to maintain the status quo
According to the Nihon Keizai Shimbun dated 12th, in a questionnaire for 28 “Bank of Japan watchers” who analyze monetary policy, only 1 predicted that there would be a revision to the Bank of Japan policy in December, and the remaining 27 predicted maintaining the status quo.
However, according to the QUICK November monthly survey of the foreign exchange market introduced in the same newspaper dated 11th, the period for negative interest rate cancellation by the Bank of Japan is predicted by 1% in December and 20% in 2014/1, and about 65% anticipate negative interest rate cancellation until April.

Conditions for interest rate hikes (cancellation of negative interest rates) are not in place
At the previous October meeting, due to the re-revision of yield curve control (YCC), 1%, which had been the de facto upper limit of long-term interest rates, was allowed to be exceeded to a certain extent.
However, since then, long-term interest rates have remained at a level far from exceeding 1%. This is because interest rates in the US declined as FRB interest rate hike stoppage observations increased, and Japan's long-term interest rates also turned to a downward trend in the form of being dragged by this.

It seems that the price level, which is an important indicator when the Bank of Japan changes its policy, has not reached the point where interest rate hikes are justified.
The November corporate goods price index announced by the Bank of Japan on the 12th only rose 0.3% from the same month last year, and the growth rate slowed from 0.9% in October. The growth rate has slowed for 11 consecutive months. Also, consumer prices for the Tokyo district in November (comprehensive index excluding fresh food) rose 2.3% from the same month last year, and have been low since 22/7. What Governor Ueda says about rising import prices, etc.The “primary force” of price increases seems to be weakening。
Meanwhile, as for wages, which are the source of “second power,” which is listed as a point of policy judgment, real wages per person in October fell 2.3% from the same month last year, which has been negative for 19 consecutive months.
Bloomberg on the 11th titled “Negative Interest Rate Cancellation, Bank of Japan's Recognition That There Is Almost No Need to Hurry This Month,” said, “The Bank of Japan is a condition for cancellation of negative interest rates, etc.The situation where sustainable and stable implementation of the 2% price target can be predicted has not yet been reachedIt is described as “I think so.”

The policy interest rate forecast (median) for US FOMC members for the end of 24 held on the 13th (US time) suggests that 0.25% interest rate cuts will be made 3 times, and FRB Chairman Powell stated that “interest rate cuts are beginning to come into view.” Senior exchange strategist Ishizuki Yukio of Daiwa Securities commented on Bloomberg's telephone interview on the 14th as “an unexpected pigeon surprise,”The momentum of the market is swinging in the direction of appreciation of the yen” he said.
Observations to stop interest rate hikes by the FRB increased, and interest rates in the US began to declineThe dollar-yen rate from mid-November onwards and Japan's stock prices are generally linked, indicating a trend where “appreciation of yen = stock depreciation”。 Even in the market on the 14th, the dollar-yen rate temporarily fell to the 140 yen range, and TOPIX fell 1.43%.
If there is a statement at the Bank of Japan meeting regarding exit strategies aimed at monetary policy normalization, such as the cancellation of negative interest rates, etc., it is conceivable that the trend of “appreciation of yen = stock depreciation” will accelerate further.