RBA Signals Possible Rate Implications as Inflation Proves More Persistent 
UK Raises Deposit Protection Limit to £120,000 to Strengthen Saver Confidence 
BOJ Governor Ueda Meets Key Ministers as Markets Eye Policy Shifts Under New Leadership 
U.S. Soybean Shipments to China Gain Momentum as Trade Tensions Ease 
Japan’s Nikkei Drops as Markets Await Key U.S. Inflation Data 
China’s Services Sector Posts Slowest Growth in Five Months as Demand Softens 
China Urged to Prioritize Economy Over Territorial Ambitions, Says Taiwan’s President Lai 
Fed Officials Split as Powell Weighs December Interest Rate Cut 
Japan’s Service Sector Sustains Growth Momentum in November 
Dollar Slides to Five-Week Low as Asian Stocks Struggle and Markets Bet on Fed Rate Cut 
Bank of Korea Holds Interest Rates Steady as Weak Won Limits Policy Flexibility 
Oil Prices Slip as Russia-Ukraine Peace Hopes Fade and Oversupply Fears Grow 
Dollar Weakens Ahead of Expected Federal Reserve Rate Cut 
The Bank of Japan (BOJ) has allocated its highest-ever provision for potential bond transaction losses, marking a cautious shift in monetary policy outlook as interest rate pressures build. According to a report by Nikkei on Monday, the BOJ has set its fiscal 2024 provision at 100%—the maximum level—for the first time in history.
This unprecedented move highlights the central bank’s growing concern that rising interest payments to financial institutions could significantly impact its capital base. As Japan navigates an environment of gradually increasing borrowing costs, the BOJ appears to be bracing for further financial strain tied to its massive holdings of government bonds.
The decision comes after the BOJ maintained its short-term interest rate target at 0.5% during its May meeting. However, market analysts believe the central bank is under intensifying pressure to continue hiking rates, especially amid a global trend of monetary tightening and inflationary concerns.
Japan’s ultra-loose monetary stance, once an outlier among major economies, is beginning to show signs of stress as the cost of maintaining such policies rises. Setting aside the full provision suggests the BOJ anticipates sustained interest rate hikes could erode the value of its bond holdings, leading to potential losses.
The BOJ did not immediately respond to a Reuters request for comment. However, this action sends a strong signal to markets that the central bank is preparing for more challenging fiscal conditions ahead.
As inflation remains above target and global central banks stay hawkish, all eyes will be on how the BOJ balances economic support with financial stability in the coming quarters.
