The Bank of Japan's benchmark interest rate decision, the biggest variable for year-end financial markets, is scheduled for this week. In the United States, which cut rates this month, important economic releases including employment and inflation data are set to follow.
The BOJ will hold its monetary policy meeting on January 18-19 to decide whether to adjust the current benchmark rate of 0.5%. Markets expect the BOJ to raise the rate by 0.25 percentage points this time. Inflation has been more stable than expected, and the continued weakness of the yen, with the dollar trading around the 155 yen level, is adding weight to rate hike expectations. If Japan's benchmark rate rises to 0.75%, it would be the highest level in 30 years since September 1995.
Financial markets are concerned about the possibility of "yen carry trade unwinding" following Japan's rate increase. Funds invested overseas due to Japan's low interest rates, known as yen carry trades, could be repatriated to Japan. This process could increase volatility in global financial markets. However, some analysts suggest the impact may be limited as the possibility of a Japanese rate hike has already been priced into markets.
Ahead of the BOJ, the European Central Bank and the Bank of England will also decide their benchmark rates on January 18. Markets expect the ECB to hold steady at its current level of 2.15% for a fourth consecutive meeting, while the Bank of England is forecast to cut from 4% to 3.75%.
In the United States, November employment reports, retail sales, and consumer prices will be released sequentially. Federal Reserve Chair Jerome Powell's remarks at the December Federal Open Market Committee meeting were evaluated as somewhat dovish. If a slowdown in employment is confirmed, future monetary policy could lean toward easing.
Domestically, the Bank of Korea will release its November Producer Price Index results on January 19. The producer price index measures price changes when producers sell goods, influencing consumer prices with a time lag. The October PPI rose 0.2% from the previous month, maintaining an upward trend for two consecutive months following September's 0.4% increase.
Other indicators of interest include Statistics Korea's releases on 2024 retirement pensions, corporate activity survey results, and parental leave statistics. The corporate activity survey shows profitability and growth of domestic companies. Parental leave data reflects aspects of the low birthrate phenomenon, including the growing trend of fathers taking parental leave.
