After the Federal Reserve's interest rate cut, the Bank of Japan chose to "stand pat," maintaining the policy interest rate at 0.25%.

The Bank of Japan believes that, given the uncertain political and economic conditions both domestically and internationally, the risk of price increases exceeding expectations is diminishing due to the appreciation of the yen, and there is currently no need to further raise interest rates.

Additionally, it is necessary to further assess and observe the actual effects of the last interest rate hike and its impact on the operation of the economy and society.

On September 18th, the Federal Reserve announced a 50 basis point cut in the target range for the federal funds rate, bringing it down to between 4.75% and 5.00%, marking the start of a new round of monetary easing in the United States.

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Following the Fed's rate cut, the Bank of Japan chose to "stand pat."

At the monetary policy meeting held on September 19th and 20th, the Bank of Japan decided to keep the policy interest rate at 0.25%, which was in line with the predictions of the economic community and the market.

The Bank of Japan believes that, given the uncertain political and economic conditions both domestically and internationally, the risk of price increases exceeding expectations is diminishing due to the appreciation of the yen, and there is currently no need to further raise interest rates.

Another reason for maintaining the policy interest rate unchanged is the rapid appreciation of the yen caused by the interest rate hike in July, which led to negative effects such as a stock market crash and severe fluctuations in the financial market.

The Bank of Japan believes that it is necessary to further assess and observe the actual effects of the last interest rate hike and its impact on the operation of the economy and society.

After the Fed's rate cut, the yen exchange rate and the Japanese stock market fluctuated along with the Fed's rate cut.

After the Fed's decision was announced, the yen exchange rate once rose to a level of 140 yen per US dollar, but later, due to Fed Chairman Powell's cautious attitude towards significant rate cuts in the future at the press conference, coupled with an increase in the actual demand for US dollars by Japanese import companies, the yen exchange rate once fell to a level of 144 yen per US dollar on the foreign exchange market on the 19th.

After that, the decline gradually rebounded and returned to a level of 142 yen per US dollar.

In terms of the stock market, due to the depreciation of the yen, coupled with the view that the interest rate gap between Japan and the United States will not narrow rapidly, the Nikkei 225 index once rose by more than 1,000 points on the 19th, closing at 37,155.33 points.

On September 20th, the Asia-Pacific stock market rose across the board, with Japanese stocks leading the way with a 2% increase.

Some analysts believe that there is an expectation in the market for a soft landing of the US economy, and the Dow Jones average index broke through 42,000 points for the first time in history, driving the rise of Japanese stocks and the Asia-Pacific stock market.

Japanese media believe that after the yen-to-US dollar exchange rate broke through the 145 yen level expected by Japanese companies for the fiscal year 2024, the inverse correlation between the yen and the Tokyo Stock Price Index (TOPIX) has strengthened, indicating that the stock market remains vigilant about the risks of reduced performance of export companies caused by the appreciation of the yen.

In addition, the vigilance against the appreciation of the yen is also reflected in the performance difference between Japanese stocks and Asian stocks.

The rise and fall rate of TOPIX has been lower than the MSCI Asia-Pacific Index for six consecutive months, setting a record since 2007.

Currently, the Japanese government and the Bank of Japan are in a "wait-and-see period" to assess the impact of the Fed's rate cut and summarize the effects of the previous phase of the Bank of Japan's rate hikes.

Japanese Chief Cabinet Secretary Yoshihide Suga said at a press conference on the morning of the 19th that the impact of the Fed's rate cut decision on the Japanese economy and financial markets is influenced by a variety of factors such as external demand and overseas price trends, and it is difficult to generalize, and will continue to pay attention to subsequent developments.

Some Japanese economic experts believe that the Fed's significant rate cut is a potential instability factor in the financial market.

As the Fed enters a rate-cutting cycle, the Bank of Japan is in a rate-hiking cycle, and the rare situation of the actual reverse movement of Japanese and American monetary policies has occurred.

Although the current financial market is relatively stable, the depreciation of the US dollar and the appreciation of the yen in the foreign exchange market may lead to unstable international capital flows centered on Japan and the United States.

Some also believe that historically, the United States has only made significant rate cuts of 50 basis points in emergencies such as financial crises, which actually reflects the severe situation of the US economy, including a weak labor market.

If the United States falls into a recession, the Japanese economy will not be able to stand alone, and the Bank of Japan's plan to raise interest rates may be thwarted.

The Bank of Japan is still looking for the right time for the next rate hike.

Bank of Japan Governor Haruhiko Kuroda emphasized during the August congressional recess that if the expectations for the economy and prices are largely realized, the basic stance of gradually adjusting the monetary easing will not change, expressing the determination to continue the route of raising interest rates.

Regarding the prediction of the next rate hike by the Bank of Japan, some economic experts believe that if the inflation data in October reaches the Bank of Japan's expectations, the Bank of Japan may raise the policy interest rate by 25 basis points to 0.50% at the monetary policy meeting in December.

Some believe that for some time, the foreign exchange market's expectation of narrowing the interest rate gap between Japan and the United States has been too strong, leading to an "abnormal" trend of selling US dollars and buying yen.

In the past two months, the yen-to-US dollar exchange rate once rose from a level of 161 yen per US dollar to 139 yen, which is actually an "overdraft state" of the yen's value.

Due to the Bank of Japan's slower pace of rate hikes this time, coupled with the Fed's denial of significant rate cuts in the future, the market's expectation of a rapid narrowing of the interest rate gap between Japan and the United States will ease, and the situation of the yen exchange rate rising sharply may change.

In addition, according to Japanese media reports, the behavior of Japanese households selling yen structurally by purchasing overseas assets still exists, which may also be one of the reasons to slow down the appreciation of the yen exchange rate.

How the Bank of Japan will deal with the "overdrawn" rate hike expectations and the uncertain domestic and international political and economic situation to ensure that subsequent policy adjustments are effective still needs further observation.