The Bank of Japan is scheduled to discuss a government bond purchase reduction plan and the possibility of additional interest rate increases at the monetary policy meeting to be held on 2024/7/30 and 31.
This meeting has the potential to have a major impact on the Japanese economy and financial markets, and it will be an important event for investors in particular.
Currently, it is neutral when viewed from the 4h indicator, so there is no basis for entry in the short term. However, depending on PCE data, there is a possibility of recovery to 105.00 in the short term, so I don't want to put in excessive bias.
✔️ Government bond purchase reduction plan
The Bank of Japan buys government bonds of about 6 trillion yen per month, and it has indicated a policy to reduce this amount. This decision is the result of careful consideration of the impact on the market through an exchange of opinions with financial institutions. The specific scale and pace of the reduction will be presented as plans for the next 1 to 2 years.
✔️ Discussion of additional interest rate increases
Bank of Japan Governor Ueda has indicated his intention to consider additional interest rate increases if the inflation rate rises toward the target of 2%. It is also necessary to consider the rise in import prices due to the depreciation of the yen and the slump in private consumption due to continued negative real wages.
✔️ Market reaction...

✔️ BLACK ROCK THOUGHTS
It is anticipated that the Bank of Japan will leave the current policy interest rate unchanged for the time being. This accommodative monetary policy has been a tailwind for the Japanese stock market, and growth in the hardware technology and semiconductor sectors in particular is expected. I will explain the Bank of Japan's policies and their impact on the market, growth forecasts for major sectors, and risk factors.
✔️ The relationship between the Bank of Japan's monetary policy and the Japanese stock market
・Current state of monetary policy
The Bank of Japan is expected to continue maintaining its current accommodative monetary policy. In the background of this, there is a high possibility that interest rate increases will be difficult due to uncertainty in price trends and government subsidies for electricity and gas charges.
✔️ Growth forecasts for key sectors
Among Japanese stocks, BlackRock sees hardware technology stocks, semiconductor-related stocks, and electronic component stocks as particularly attractive. This is because these sectors benefit from advances in AI technology and tension in US-China relations. Growth forecasts for each sector are shown below.
Thus, growth in the semiconductor sector in particular is expected, and investment in these fields is promising.
✔️ Risk Factors and Their Management
・Effects of the depreciation of the yen
The depreciation of the yen raises import costs...

The Bank of Japan will hold a monetary policy meeting from July 30 to 31. Additional interest rate increases are expected to be discussed at this meeting along with government bonds and purchase reduction plans. Interest rate hikes among economists are limited to around 30%.
✔️ Economists' forecasts and consumption concerns
・Survey of 48 economists
The percentage of economists who anticipate that the Bank of Japan will raise additional interest rates at this month's meeting is 29%. It shows a slight decrease from the previous 33%. As for the period of interest rate hikes, even though October is still the most anticipated, it is attracting attention that the advance to September is progressing.
・Postponement of interest rate hikes
43% cite sluggish private consumption as a reason to forego current interest rate hikes. The reason is that, based on the fact that consumption continues to be at a standstill, it is necessary to determine the extent to which wage increases over the summer will affect consumption and prices.
[Views on education 💡]
✔️ Reduction plans for government bond purchases and their effects
The reduction plan for government bond purchases is regarded as a factor that raises the hurdle for interest rate hikes. Governor Ueda has stated that it is possible to simultaneously decide on a reduction plan and interest rate hikes, but current consumption...

✔️ US Stock Market
President Biden's withdrawal from the election campaign was accepted, and expectations for the financial season for high-tech companies increased, and there was a backlash. The S&P 500 stock index rose 1.08%. The Nasdaq Composite Index rose 1.58%. The Dow Jones Industrial Average rose 0.32%.
✔️ Market outlook
On Wall Street, while concerns about summer adjustments are raised, about two-thirds of respondents to the Bloomberg “Markets Live (MLIV)” survey anticipate that financial results will boost US stocks. Settlement of Tesla and Alphabet is ahead, and there is a possibility that this will have a major impact on the direction of the market.
✔️ Political Implications
The market reaction to President Biden's withdrawal from the election campaign and Vice President Harris's expression of support was slow, and the dollar and government bonds were minor. Political turmoil will not drastically change the direction of the market price, and I think economic growth will determine the final direction.
✔️ The bond market
US bond yields rose slightly. The 30-year bond yield is 4.47%. The 10-year bond yield is 4.25%. The 2-year bond yield is 4.52%. Short-term bonds have been bought from observations that interest rate cuts will be implemented in September, and interest rate differences with long-term bonds have narrowed...

The yen exchange rate is moving in the middle of the $1 = 157 yen range. It has been almost flat since last weekend, and President Biden's announcement of withdrawal from the US presidential election has not had a significant impact on the market. One reason for this is that there were no surprises with Biden's withdrawal.
[Views on education 💡]
✔️ Effects of system failure
A global system failure occurred last weekend, and there were concerns about financial and traffic disruptions. The yen temporarily surged as a result of this, but then it returned to the middle of the 157 yen range. The risk aversion movement encouraged purchases of yen and dollars, and the impact was limited to the short term.
✔️ Buying in dollars and selling in yen for actual demand
There is an expectation that importing companies will continue to sell yen and buy dollars. Japanese companies are buying dollars to control import costs. In particular, import demand is expected to increase due to seasonal factors, and it is thought that actual dollar purchases will continue.
✔️ Dissolution of yen carry transactions The volatility index for US stocks is rising, and there are concerns that the risk environment will deteriorate. Therefore, there is a possibility that yen carry transactions where high-interest currency is bought by selling yen with low interest rates will be resolved. The rise in volatility indicates market uncertainty, and investors...

✔️ National Core CPI for June
Signs of inflation According to data released by the Ministry of Internal Affairs and Communications, the national consumer price index (core CPI, excluding fresh food) in June rose 2.6% from the same month last year. A major factor is that energy prices have risen as much as 7.7% due to government subsidies for measures to mitigate drastic changes in electricity and gas prices being cut in half. In particular, city gas prices showed a 3.7% increase. Furthermore, lodging fees and household durable goods have also risen drastically, and it was confirmed that inflationary pressure is intensifying.
✔️ Inflation and the Bank of Japan's monetary policy
There is a possibility that rising prices in Japan will have a major impact on the Bank of Japan's monetary policy. Attention is being paid to whether the ultra-low interest rate policy up until now will be maintained, but since there is a high possibility that sudden monetary tightening will adversely affect economic growth, careful judgment is required.
✔️ Impact on the dollar to yen exchange rate [educational opinion 💡]
・Impact of Japan-US interest rate differences
While interest rates in America remain at a high level, interest rates in Japan remain at a low level. This Japan-US interest rate difference is a major factor promoting the appreciation of the dollar and the depreciation of the yen. While there is a possibility that the Fed will raise interest rates further as a countermeasure against inflation, the Bank of Japan continues its mitigation policy...

Mr. Hideo Hayakawa, a former Bank of Japan director, expressed the view that while the Japanese economy is temporarily at a standstill, it is unlikely that the Bank of Japan will raise additional interest rates at the monetary policy meeting at the end of this month. The reduction in government bond purchases will be on a solid scale. It is conceivable that this trend in monetary policy will have a major impact on the dollar-yen exchange rate.
✔️ Current state of the Japanese economy
Economic activity is lacking in strength due to the effects of high prices, and certification fraud issues among automobile manufacturers have also had an adverse effect on production. If interest rates are raised in a hurry under such circumstances, there is a possibility that it will be regarded as responding by worrying about the depreciation of the yen, and there is a risk that it will cause market turmoil.
✔️ Bank of Japan's monetary policy and government bond purchase reduction
The Bank of Japan decided on a reduction policy for government bond purchases at the June meeting, and plans to compile a “specific reduction plan for the next 1-2 years or so” at the next meeting. It is expected that the reduction in government bond purchases will be solid. Coupled with the Ministry of Finance's yen buying intervention, it is expected to have the effect of suppressing the progression of yen depreciation.
・About specific reduction ranges
It is said that there is a possibility that the monthly purchase amount will gradually be halved from the current around 6 trillion yen to about 3 trillion yen in about 2 years...

Former President Trump is aiming to return to the White House for the 2024/11 US presidential election.
He said he did not intend to dismiss Chairman Powell before his term expires.
What impact will this statement have on future monetary policy and the dollar-yen exchange rate?
Let's take a closer look at Mr. Trump's policies and their impact on the dollar-yen exchange rate.
1. Federal Reserve Rate Cut Warnings
Trump warned that the Fed should not cut interest rates before the November presidential election.
According to his assertion, interest rate cuts before the election may work in favor of President Biden, so the idea is that they should not have an unnecessary impact on the economy or election results.
If the Fed refrains from cutting interest rates, interest rates on the US dollar will remain relatively high, and there is a possibility that this will act as a factor in the appreciation of the dollar.
The appreciation of the dollar is a factor that boosts the dollar-yen exchange rate, and it is expected that the depreciation of the yen will progress.
2. Emphasis on low interest rate policies
Mr. Trump places importance on low interest rates as the main point of his own economic policy “Trumpnomics.”
Low interest rate policies generally tend to lower the value of currencies, but their effects change depending on Mr. Trump's specific policy implementation method...

✔️ Federal Reserve Chairman Powell's Remarks
US Federal Reserve (Fed) Chairman Powell expressed recognition in the question and answer session after the lecture held in Washington on 7/15 that inflation and economic activity were decelerating as expected by the Fed. However, they avoided making clear statements about interest rate cuts at the Federal Open Market Committee (FOMC) at the end of this month, and emphasized that there was no intention of sending signals about specific meetings. Chairman Powell has indicated a policy to make policy decisions while judging the situation at each meeting.
✔️ Market impact and dollar to yen outlook
Chairman Powell's remarks have given uncertainty to the market. While the possibility of interest rate cuts has been suggested, the timing was not clarified, so investors need to keep a close eye on the Fed's next move. This uncertainty is a factor that increases the volatility of the dollar-yen exchange rate in the short term.
✔️ When the possibility of interest rate cuts increases
If the possibility that the Fed will cut interest rates increases, the dollar yen is expected to fall. Interest rate cuts are to lower interest rates in the US and reduce the attractiveness of the dollar. Furthermore, the risk-off movement is progressing, and investors are buying yen as a safe asset...

The dollar and yen plummeted in the New York exchange market. The reason behind this is that the US Consumer Price Index (CPI) for June, which was announced on the same day, fell short of expectations, and expectations for interest rate cuts from the Fed (US Federal Reserve) increased. We will analyze in detail the details of the sharp decline in the dollar and yen, the factors, and future prospects.
✔️ US CPI details
The announcement of the US CPI in June brought a big surprise to the market. Composite Index -0.1% compared to previous month (forecast +0.2%) Core Index (excluding food and energy) +0.1% compared to previous month (forecast +0.3%) Supercore (service price excluding housing costs and energy) -0.05% compared to the previous month (2 consecutive months of decline) The decline in gasoline prices contributed greatly to the decline in the comprehensive index, and the continuous decline in the supercore has been a phenomenon since last fall. This raised the possibility that the increase in inflation in the first quarter was temporary.
✔️ Market Reaction
The decline in CPI rapidly raised expectations for the Fed to cut interest rates. In the short-term financial market, interest rate cuts in September have been completely factored in, and the possibility of 3 interest rate cuts has also emerged from expectations of 2 interest rate cuts by the end of the year. Due to this expectation, US debt...